Lower interest rates give home sales boost
The Canadian property market remained relatively upbeat during the first six months of this year because of lower- than-normal interest rates.
Currently, a fixed mortgage, which is preferred by most Canadians, costs between 6.9 and 8.1 per cent, according to the Bank of Nova Scotia. However, it is possible to get a one-year mortgage at less than seven per cent.
A survey of 25 major Canadian cities by the Canadian Real Estate Association (CREA) showed that home sales edged higher in May for the fifth straight month.
According to CREA's seasonally adjusted figures, 20,396 homes were traded, representing a two per cent increase over the previous month.
'The string of monthly increases has pushed year-to-date activity six per cent above where sales were this time last year and within five per cent of the all-time high in 1997,' Pierre Beauchamp, chief executive officer of CREA, said.
However, the association cautioned that buying activity was topping out because new job creation was tailing off.
'Monthly activity is topping out,' Mr Beauchamp said. 'Now that full-time job growth is moderating and long-term mortgage rates have inched upward, sales are expected to moderate over the summer.' Worries about after-tax income was also affecting sales. According to CREA, most Canadians were concerned about the fact that a large amount of their monthly income was being eaten by taxes.
Another factor putting a damper on buying sentiment is concern about creeping inflation which is helping nudge interest rates up.
According to the Bank of Nova Scotia, prices in Vancouver have remained relatively steady - albeit still the most expensive in the country. According to the survey, prices for a second-hand home in Vancouver have reached C$291,172 (about HK$1.5 million).
The average price for a home in Toronto is about $60,000 less, at $231,908. In other popular destinations, such as Calgary, a second-hand home can cost $167,778. A home in Edmonton is slightly cheaper at $122,534.
Most Canadian banks report the flow of Chinese immigrants to centres such as Toronto and Vancouver has dropped off substantially because of the after-effects of the Asian crisis.
Prices for Vancouver homes have come off by 15 to 25 per cent since the onset of the crisis, according to an official with the Bank of Nova Scotia.