Canadian Housing Markets Buck Recession and Trend Upwards

With the worst of the recession over, residential real estate markets in major Canadian centres are poised for growth in the final quarter of 2009, according to a report released today by RE/MAX.

The RE/MAX Bricks and Mortar Report found the bounce back that began in early Spring has made this recession one of the shortest on record. Low interest rates, pent-up demand, and improved affordability levels have all played a role in the recovery now well-underway. Percentage increases in unit sales from January to August 2009 were led by Vancouver, (up a substantial 14 per cent to 23,158), Victoria (up 7.4 per cent to 5,266), Edmonton (up 6.2 per cent to 13,691), Regina (up five per cent to 2,597), Ottawa (up 2.4 per cent to 10,830) and Toronto (up 1.8 per cent to 58,421). Housing values are already ahead of record-breaking 2008 levels in seven of the 11 markets surveyed, including Newfoundland-Labrador (18.1 per cent year to $203,584), Regina (6.4 per cent to $244,088), Halifax-Dartmouth (3.5 per cent to $239,633), Winnipeg (3.5 per cent to $207,006), Ottawa (3.3 per cent to $301,684), and Toronto (up 0.3 per cent to $385,978). Nationally, average price hovers at $312,585, up 0.5 per cent over one year ago.

The strength of the residential housing sector cross-country has taken many economists and housing analysts by surprise once again. In terms of its impact on the resale market, by historical standards, this recession was one of the mildest. The resilience of bricks and mortar has been demonstrated time and again. While there may still be some challenges down the road, the worst is definitely behind us in the housing industry.

The recovery of Canada’s resale housing markets speaks to the tremendous value Canadians place on the importance of owning a home. The number of Canadians overall who own a home has increased since 1981 from 62.1 per cent to 68.4 per cent, with some markets posting even higher homeownership rates — Calgary (74.1), St. John’s (71.5), and Regina (70.1). Significant gains have also been made over the same period in markets such as Ottawa, where levels rose from 51.4 per cent to 66.7 per cent, and Toronto, where levels rose from 57.3 to 67.6 per cent.

Public sentiment can perhaps best be illustrated by a recent Angus Reid Omnibus Survey* that asked the question “In which do you feel more comfortable investing your money? The stock market or real estate.” Out of 1,000 respondents from coast-to-coast, 77 per cent chose real estate. The results of the RE/MAX Bricks and Mortar Report are clearly representative of this national dynamic at work.

Markets are heating up across the country as purchasers take advantage of affordable prices and rock bottom interest rates. Those who missed the boat in years past have found that sitting on the sidelines can be a costly move. Prices are on the upswing and inventory levels are tightening, so the push toward homeownership is expected to continue throughout the Fall and possibly into early 2010.

Over the past thirty years, the Canadian residential real estate market has experienced three major downturns – 1981, 1989, and 2008. While there have also been regional fluctuations throughout the years, return on investment over this period has been substantial, with Vancouver, Victoria, Toronto, Regina and Ottawa leading the country in terms of price appreciation.

The overall stability of real estate as an investment has also played a role. Markets like Halifax-Dartmouth, Regina, Ottawa, Winnipeg and London have provided steady returns (especially in recent years), with minimal fluctuation.

* The Angus Reid Omnibus Survey was conducted on September 15, 2009 and yields a margin of error of +3.1 per cent, 19 times out of 20.

Historians Reject Depression Fears in Canada

Blair Neatby knows what hardship is. He grew up during the Great Depression in the Prairie village of Wawota, Sask., where for many years there was no work, almost no money, plagues of grasshoppers and droughts so bad he remembers the dust “piling up in drifts, like snow.”

Neatby’s father ran a local grain elevator. His salary depended on how much grain he handled, but there was so little wheat and barley to buy he never brought home much money in the Dirty ’30s.

“We took pride in survival,” Neatby says. “ We shared clothes, we grew our own vegetables, we economized as much as we could. We just assumed we would get through it, and we had little choice.”

When the Depression ended Neatby went to war, fighting through Normandy, Holland and Germany. Forty-two thousand Canadians died in the Second World War, but Neatby survived, returning home and eventually becoming a professor at Carleton University and one of the country’s leading political historians.

He acknowledges the current recession is hurting many Canadians, but he also says today’s economic troubles are nothing compared to the severe insecurity and adversity faced by Canadians in the past.

“Since the war we have enjoyed an extraordinarily stable, peaceful and ascending state for our society,” Neatby says. “Younger generations, people now in their 30s and 40s, have never had to deal before with a serious economic crisis.

“It’s hard for them to understand, but we have a very high standard of living, even compared to the 1960s, never mind the ’30s. And it remains high today.”

There is much to be thankful for, despite the factory layoffs, the lousy stock market and the loss of billions of dollars of retirement savings, all of which are reflected in the daily avalanche of dreary economic news that has cast a shadow across the country.

Certainly there is real trouble in places — in cities such as Windsor, Ont., for example, where decades of carmaking affluence are coming to an end, or Port Alberni, B.C, where once-prosperous forestry mills are in crisis.

Yet Canada remains a land of relative luxury and opportunity, with ample cause for optimism and even celebration. And Canadians seem more positive about the future than the bad economic headlines might suggest.

A new Ipsos Reid poll of 1,001 Canadians conducted in late March for Canwest News Service and Global National shows that 83 per cent of people surveyed are optimistic about Canada’s future as a nation, and about their “standard of living compared to others.”

Eighty-seven per cent said they feel positive about the future “despite everything that’s going on in the world.” Sixty-nine per cent believe Canada will emerge from the recession “stronger than it started,” however only 44 per cent expect the downturn to end this year.

We are “light years” from the Great Depression, says McGill University economist William Watson, writing in the February issue of Policy Options magazine.

No one knows how long or deep this recession will be, but to date our economic output, or gross domestic product, has only fallen for a single quarter, at an annualized rate of 3.4 per cent. During the recession of 1981-82, GDP fell 4.9 per cent each year.

The unemployment rate reached 7.7 per cent in February — not much worse than the 33-year low of six per cent achieved during the boom time of 2007 — and far better than the 12 per cent unemployment of 1983, or the 11.3 per cent of 1993. In the Depression unemployment was estimated at 30 per cent.

There was no employment insurance in the 1930s, no Canada Pension Plan, no severance payments for laid off workers and no provincial welfare programs.

During the 1930s, providing “relief ” to the needy was the responsibility of municipalities, but towns and cities had little help to offer because so few people could pay their property taxes.

There was also no medicare.

“It’s important to keep perspective, because in Canada even in the worst of times, we’re still one of the best off countries in the world,” says Catherine Swift, president of the Canadian Federation of Independent Business. “Today most people’s personal circumstances haven’t changed. They’re still employed, they’re still making the same money they were making a year ago.”

While some believe the recession will weaken the West, U.S. author Joshua Kurlantzick calls the global meltdown a more serious threat to the anti-western regimes of China, Russia, Venezuela and the Persian Gulf.

“Such an economic crisis poses a major threat to some of the world’s most resilient autocracies,” writes Kurlantzick in the March issue of The American Prospect magazine. “A strong economy was their only backstop. Now, starved of the growth that keeps them in power, and unable to repress their people as old-fashioned dictators did, these autocracies may have nothing left to fall back on.”

David Giuliano, moderator of the United Church of Canada, has called the crisis a “historic turning point,” in which we might rework the financial system to measure the worth of a company not merely by the size of its shortterm profit, but “according to what it produces and contributes to society.”

Perhaps, says Blair Neatby, the recession might teach younger Canadians who grew up in the age of debt and leverage a simple lesson about the value of saving.

“People like me came home from the war and became a generation of savers,” he says. “And we looked with some concern at our children and grandchildren, who didn’t seem to be as concerned with the importance of saving. They hadn’t lived, as we had, through a time of great insecurity.”

Source: Calgary Herald April 6, 2009