Toronto is a huge hit with buyers
Canada's real estate market remains a global stand-out, according to the latest analysis by Scotia Economics.
Second-quarter data from the research division of Canada's Scotiabank shows declining residential prices in North America, Europe and Australia. It found that while Canada's hot housing market also has begun to cool, 'it remains a notable outperformer', rising 5 per cent for the quarter.
How long can this last? Scotia Economics expects a levelling out of prices when third-quarter figures are released, but it seems reluctant to predict trends in the current market.
Adrienne Warren, a senior economist and real estate specialist at Scotia Economics, notes that historically low borrowing costs combined with sharply lower home prices in many markets have restored housing affordability.
'In more typical times, this would be a sufficient catalyst for a strong revival in housing demand. But these are not normal times. Consumer confidence has been dented by persistently high unemployment, intensifying European sovereign debt concerns, and signs that the global economic recovery is losing momentum.'
With renewed financial market volatility adding to the unease, 'many households are choosing to prioritise savings and debt repayment over major new purchases,' Warren says. 'We expect global housing demand to remain moribund until the global economic recovery gets back on a firmer footing and some financial market stability returns.'
But in Canada - and specifically Toronto - buyers seem keen to invest. Greater Toronto REALTORS reported a 25 per cent increase in transactions in September compared to the same month last year, and a 2.6 per cent year-on-year increase for the first nine months of 2011.
'We have experienced strong growth in sales this year, with a much more active summer compared to 2010,' says Toronto Real Estate Board president Richard Silver.
He notes that while sales have been strong, agents have experienced a shortage of listings, resulting in more competition between buyers.
Prices have reflected that, with the Royal LePage House Price Survey showing healthy growth for Toronto property. The city witnessed 'impressive price gains across all three housing types surveyed due to a lack of supply', according to the survey. 'Standard two-storey homes increased 7.6 per cent year-over-year and detached bungalows 9.4 per cent. Standard condominiums increased a healthy but more modest 6.0 per cent as demand was more easily met with a higher level of inventory.'
'The strength in Canada's national housing market conceals signs of predictable softening in some regions,' says Phil Soper, president and CEO of Royal LePage Real Estate Services. 'The third quarter saw a return to a normal seasonal business cycle as price appreciation slowed in many areas - with some average values even falling slightly - after the busy spring trading season. A broader slowdown is expected in the months ahead but fears of a US-style correction are completely unfounded.'
Many of these buyers continue to hail from Hong Kong and the mainland, according to marketer Cori Howard, founder of The Key PR. He says they perceive Toronto as the new alternative to New York and London when it comes to buying property.
'Part of the reason is that its real estate is still considered to be undervalued, compared to those cities,' Howard says. 'The other reason is that Toronto is considered by many Chinese buyers to be the safest of safe havens. We have a strong economy, a stable government and excellent schools. I would say that because of this, Toronto is now considered to be the condo capital of North America.'
There is little supported data on the number of foreign buyers of properties in Toronto, however, it's been estimated that investors from Hong Kong and the mainland number from 20 to 50 per cent.
'One realtor in Toronto has said Chinese investors account for 40 to 45 per cent of all new condo sales in the Toronto area,'says Howard.
Another realtor in the Toronto area has said 60 per cent of luxury resales - homes selling for C$1.3-million plus (HK$10.1 million) - are going to Chinese,' says Howard.
Onni, one of the biggest developers in the Toronto market, is building a mixed-use, retail-residential development in Etobicoke, along the Toronto waterfront, that is attracting Chinese buyers. Sales manager Sue Young says Chinese buyers in all three towers represent 70 per cent of sales.
When construction is completed in 2014, Westlake will feature three towers, with units starting at C$252,500 and including a 24-hour concierge, guest suites, an outdoor lounge and putting green and access to the new urban village of shops, restaurants, supermarkets and a 30,000 sqft fitness and entertainment centre.