-   Solid early-year housing starts, home resales and price appreciation
    -   Western provinces most active markets, but activity should remain
        healthy across most major urban centres
    -   Ongoing erosion in housing affordability points to a softening in
        housing activity later in 2007TORONTO, March 7 /CNW/ - Healthy housing activity is expected across
Canada despite some loss of momentum later this year, according to experts who
presented today at Scotiabank's Canadian Real Estate Outlook and Trends Forum
2007.
    During the forum, which was held in Toronto, keynote speaker Phil Soper,
President and CEO, Royal LePage Real Estate Services observed that, "Fuelled
by solid economic conditions including moderate interest rates, high
employment and strong consumer confidence, Canada's housing market was quick
out of the gate this year. Early indications point to a stronger than forecast
spring market, the most important trading period on the annual real estate
calendar. We expect that this resilient market will continue throughout 2007."
    Also speaking was Adrienne Warren, Senior Economist, Scotiabank.
"Canada's housing market is the rabbit that keeps on going, and going,"
remarked Ms. Warren, while presenting the findings of her latest Real Estate
Trends Report. "Warmed by mild winter temperatures, housing starts in January
jumped to a two-and-a-half year high while home resales climbed to a new
record." Ms. Warren added that the trend in national new and existing home
prices, while off the highs of last spring, is still averaging about 10 per
cent year-over-year.

    Western provinces lead in growth

    In the report, Ms. Warren noted that Canada's booming Western provinces
were the hottest markets in the past year. In the last twelve months, home
price appreciation west of the Ontario border averaged 18 per cent
year-over-year - four times the pace in the east.
    The report added that significant regional performance disparities will
persist, with the Western provinces expected to again lead in average house
price increases and construction in 2007, supported by tighter market
conditions, record employment rates and more favourable demographic trends. In
fact, last year Western Canada's active resource industries and tight labour
markets attracted more than 70,000 Canadians to Alberta and British Columbia
from other parts of the country.
    Despite the western-biased growth, Ms. Warren reported that virtually all
of Canada's major urban markets are currently reporting year-over-year price
increases. A number of cities are enjoying strong population and employment
growth which support strong housing price gains. For example, Toronto is the
overwhelming destination for immigrants to Canada and natural resource
abundant centres such as St. John's, Saguenay and Sudbury are also witnessing
above average job growth.

    Canadian housing expected to remain buoyant despite U.S downturn

    "The buoyancy of Canada's housing market is particularly impressive in
light of the marked slowdown under way south of the border," observed
Ms. Warren, who noted that U.S. housing starts and resale volumes have fallen
roughly 25 per cent and 10 per cent, respectively, over the past year.
    In the Real Estate Trends Report it is noted that Canada is unlikely to
follow a similar path to its southern neighbour in 2007. Relative to the
United States, speculative investing has been less active, overbuilding less
prevalent, and high risk lending less widespread. A consistently strong
domestic job market and historically low mortgage rates in Canada are
sufficient to maintain at least some forward momentum.

    Housing affordability impacted by rising prices

    In her report, Ms. Warren noted that some softening in overall Canadian
housing activity appears inevitable, since housing affordability has been
eroded by the steady run-up in prices since the start of the decade and
pent-up buyer demand has been largely absorbed. The report predicted a drop of
roughly 10 per cent in home sales and housing starts this year and national
price increases in the mid single digits.
    At this late stage in the cycle, affordability favours lower-priced
multiple-unit housing, such as condominiums, over single-detached homes. In
addition "move up" buyers who have already built up equity in their homes will
likely be more active than first-time purchasers. Renovation activity should
outpace new construction and sales, sustained by the record number of existing
home sales in recent years.

    Steady borrowing costs now, lower later

    Scotiabank's Deputy Chief Economist Aron Gampel indicated that "The
Canadian economy would record moderate growth this year in response to the
slowdown in the United States, ongoing competitive issues, including a strong
Loonie, and prior interest rate adjustments." Mr. Gampel also predicted that
economic prospects would remain strongest in the resource-rich regions, and in
the fast-growing service and construction sectors that are supportive of the
nationwide boom in infrastructure spending. According to Mr.Gampel, "In this
environment, borrowing costs will likely remain steady for the time being,
though the slowing momentum in growth points to lower interest rates in the
second half of the year."

    Scotia Economics provides clients with in-depth research into the factors
shaping the outlook for Canada and the global economy, including macroeconomic
developments, currency and capital market trends, commodity and industry
performance, as well as monetary, fiscal and public policy issues.
    To review the full report, visit the Scotia Economics section of
www.scotiabank.com

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