Housing frenzy in Canada defies central bank's soft landing view
At the central bank in Ottawa, officials are forecasting a soft landing for the housing market. On the ground in Canada, brokers and homebuyers see prices that keep going up.
Re/Max, the country's largest residential property agent, raised its forecast for home price growth to 3 per cent from 2.5 per cent last Friday because transactions and values were so high in the first three months of this year. In March, housing sales rallied 4.1 per cent, the most in 10 months.
"We're not seeing any" signs of cooling, said John McKenzie, a real estate agent at Royal LePage in Sechelt, British Columbia. Government forecasters are "kind of like weathermen. Quite often they're just wrong. Sometimes they're going to tell you it's pouring rain and you wake up and it's a nice day".
Prices in Canada have been rising since 2009, resisting regulators' efforts to cool the market by restricting credit. In Toronto and Vancouver, values have surged as much as 56 per cent in six years. Now as the European Central Bank's bond buying helps drive down rates to near-record lows in Canada, the housing market is poised to ascend even higher.
The Bank of Canada said in its quarterly monetary policy report last week that it sees signs of moderation in the housing market, with starts and resale activity slowing since last autumn. Residential investment as a share of gross domestic product is set to drop as Canadians spend less, Bank of Canada governor Stephen Poloz said in the report.
"Despite localised risks, the most likely scenario as the economy gains strength remains a soft landing in the national housing market," Poloz said.
Gurinder Sandhu, executive vice-president of Re/Max Ontario-Atlantic Canada, detects no softness in housing. "In Canada, we're in a perfect storm," Sandhu said. "Low interest rates are really driving the demand. Consumers are showing an incredible amount of confidence - more than we've seen in the past few years."
Re/Max boosted its prediction for price growth this year to 7 per cent from 4 per cent in Toronto, and to 6 per cent from 3 per cent in Vancouver. Sandhu said the two cities' flurry of activity will push up national figures and spill over into surrounding regions.
Toronto home sales increased 11 per cent to more than 8,000 units sold in March over the prior year, according to the Canadian Real Estate Association. Prices jumped 10 per cent to about C$601,500 (HK$3.82 million).
In Vancouver, sales soared 53 per cent and the average cost to buy a home rose 11 per cent to about C$870,000.