Economist predicts a healthy
Canadian housing market

Good news if you’re planning to sell your home this year: the forecast for home sales remains strong. According to RBC Financial Group economist Carl Gomez, “There is still a very deep pool of potential demand in the housing market in Canada. Economic conditions of the 1990’s caused people to delay buying homes. People are moving up to new homes because of low rates. And many aging baby boomers are downsizing to condominiums, adult lifestyle communities or recreational properties.”
This healthy real estate market has sparked a building boom in new homes, with housing starts climbing back to the levels they achieved in the early 1990’s. One important difference is that today’s developers are building homes based on market demand, in an effort to match supply to demand.

Advice for buyers of investment properties
Some homeowners are purchasing second properties as investment, for example, a house, cottage, or condominium that may be rented to tenants. “If you are buying a second property, look carefully at the local rental markets,” advises Carl Gomez. “You’ll want a property that’s relativly hassle-free, and properties located close to major amenities usually command better rental prices than those that aren’t”.
Cottages are becoming popular investment properties, with good potential returns for those located within easy driving distance of larger centres. Be aware that purchasing this type of property is increasingly difficult, because the demand for cottages in popular areas beginning to outpace supply.

Target market is more balanced.
According to Carl Gomez, despite intense activity in the housing market, Canadians are not in a ‘housing bubble’, in which prices rise dramatically within a short period of time, like the one in the 1980’s. “In the late eighties, there was a lot of speculative building, leading to an imbalance between supply an demand, but today the housing market is more balanced.
Economists look for “hosing bubblies’by comparing the price of housing to average disposable income growth. While this price/income ratio has increased over the last year, it is stilll only at the level reached during the mid-1990’s and nowhere near the speculative highs of the late 1980’s. “Today’s housing isn’t over-valued because the recent increase in prices is being driven mostly by healthy income gains”, Carl Gomes says.
Healthy demand for homes is expected to continue for at least a decade or more, making real estate a staable investment that offers solid rated of return over time. As Carl Gomez points out, “A home is the only investment you can make that offers so much utility and personal satisfaction.”

FAST FACT:
The “baby boomers” will continue to strongly influence the real estate market as they move into retirement. One in four heads of household strongly intend to move in the next 5 to 10 years, and those whose children have left home will opt for a smaller property. The most important feature they will seek in their next home is getting closer to nature/tranquillity.