TORONTO, Feb. 26 /CNW/ - Canadian real estate markets remain remarkably
buoyant, especially in light of the deepening housing downturn in the United
States and the generally softening conditions in most other advanced economies
globally, according to experts who presented today at Scotiabank's Canadian
Real Estate Outlook and Trends Forum 2008.
    During the forum, which was held in Toronto, keynote speaker Phil Soper,
President and CEO of Brookfield Real Estate Services commented, "Our
expectations are that balanced conditions will prevail throughout 2008, which
will mark a return to a more 'normal' environment than the highly skewed
seller's market that we have experienced over the better part of this decade.
A stumbling American economy will impact us, slowing growth here at home, yet
the solid foundation that supports the contemporary Canadian economy should
prevent the housing market here from retracting."
    Also speaking at the conference was Adrienne Warren, Senior Economist,
Scotiabank. "We expect construction, sales and price gains to moderate in 2008
due to decreasing affordability, especially for first-time buyers, and some
softening in domestic economic conditions associated with the intensifying
U.S. slowdown," remarked Ms. Warren while presenting the findings of her
latest Real Estate Trends Report. "Housing starts will likely ease to around
204,000 units, still firmly above underlying household formation, with the
more affordable multiple-family segment holding up better than single-detached
construction."
    Ms. Warren added that more balanced resale market conditions, as sales
volumes edge down and more listings come on stream, should bring average price
increases back into the mid-single digit range. Renovation activity, which
lags the trend in home resales by one to three years, will outperform new
construction.
    Mr. Soper added, "New flexible financial products, affordable interest
rates and increasing choice in the condominium market across Canada, will
continue to attract first-time buyers to real estate - even in high-priced
markets. We can also expect to see a broadening buyer pool, as emerging high
growth market segments such as single female buyers are anticipated to take
advantage of the favourable market conditions."

    Economic conditions still favour Western Canada

    In her report, Ms. Warren states that housing starts totaled
228,343 units in 2007, essentially matching the high level of activity of the
prior two years and only two per cent below the 233,431 unit cyclical peak of
2004. Strength was evident across the country, but led by more than a 60 per
cent surge in new homebuilding in Saskatchewan, underpinned by strong job
growth, good affordability and a positive shift in net interprovincial
migration. Resale activity is equally brisk, with MLS sales volumes reaching a
new record in 2007 and average home prices climbing a further 11 per cent.
While Western Canada continues to lead in price appreciation, average home
prices rose by at least five per cent in all provinces last year. The momentum
of construction and sales has carried through to 2008.
    Ms. Warren also reports that from a demand standpoint, economic
conditions still favour Western Canada, with its booming resource-based
industries and extremely tight labour markets. Yet, affordability is becoming
a constraining factor in several centres, including Calgary where average home
prices have doubled in the past four years.
    From a supply perspective, most Canadian markets are still in sellers'
territory, in which prices would be expected to rise faster than inflation.
Yet, some of the hottest markets in recent years, including Edmonton, have
become much better balanced due to a flood of new listings. Based on a
combination of job growth, housing supply and affordability, among this year's
potential outperformers are Saskatoon, Regina and Winnipeg in the West,
Sudbury, Hamilton and Quebec City in Central Canada, and St. John's to the
East.

    Commercial markets to lead

    Commercial market activity in Canada should be brisk in 2008 even as the
pace of residential building gradually cools. Notwithstanding a number of
major new office tower developments currently underway, centred in Toronto and
Calgary, significant new space is not expected until 2009.
    "Given a high pre-lease ratio, vacancy rates should remain low and rents
on the rise," Ms. Warren said in her presentation. "The national downtown
office vacancy rate hit a 22-year low of just 4.7 per cent in the final
quarter of 2007, with both Calgary and Vancouver below the three per cent
mark. Demand for new office space is being supported by strong employment
growth, environmental and technical upgrades, and institutional investor
interest.

    A housing boom for the history books

    Ms. Warren concluded her presentation with the discussion of real home
price appreciation, noting that Canada's current housing boom is the strongest
and longest of the post-war era. Between 1998 and 2007, average
inflation-adjusted home prices have soared some 65 per cent, easily besting
the 32-56 per cent appreciation of the prior three housing cycles of the
1960s, 1970s and 1980s. At their peak in 2005, U.S. real home prices had
increased a cumulative 48 per cent from the 1995 trough.
    "Canada's record price gain owes entirely to the longevity of the
expansion," said Ms. Warren. "The current housing upswing is going on ten
years, whereas the prior three cycles ranged from five to six years. It has
also outlasted the housing booms experienced in many other advanced economies
this decade. Average annual price appreciation over this period has actually
been quite typical at just under six per cent per year, and well below the
almost 10 per cent average annual price gains recorded in the late-1980s."

    Economy to maintain moderate growth

    Aron Gampel, Vice-President and Deputy Chief Economist, Scotiabank, also
provided a brief overview of the changing economic and financial conditions
that are affecting the Canadian outlook.
    According to Mr. Gampel, "the Canadian economy is likely to maintain
moderate growth momentum this year and next, with the strength of the
development boom in the resource-rich regions of the country providing a much
needed offset to the increasing drag on our manufacturing centres from the
intensifying U.S. slowdown and persistently strong currency." Mr. Gampel also
added that "while underlying domestic fundamentals are still encouraging and
broadly supportive of the real estate market, the increasing downside risks to
the U.S. outlook in the wake of the ongoing financial market volatility could
further restrain housing's overall performance."
    Scotia Economics provides clients with in-depth research into the factors
shaping the outlook for Canada and the global economy, including macroeconomic
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