36 | USA WORDS | Adrian Bishop


US hot, Canada chilly I


n parts of Canada, much like the UK, temperatures have been unseasonably low – and the same icy chill is threatening to blow through its property market.


Not so over the border in the US, where the property market outlook is positively sunny and survey after survey reveals rising confi dence and more importantly, rising prices. As US news specialist Bloomberg succinctly puts it, “Canada’s property blitz is winding down just as U.S. housing perks up”. Don’t get me wrong, property prices are only showing signs of falling slightly in Canada. As OPP Connect reported in March, the Canadian Real Estate Association said that due to lower demand, average prices were predicted to fall 0.2% this year to $362,600. But it suggested national average prices would rise 1.7% in 2014 to $368,700, refl ecting a slow but steady improvement in activity and predicted rises especially in British Columbia. Another report, the Emerging Trends


from Real Estate for 2013 from respected accountancy company pwc, is also positive about Canada’s real estate market. “In a world struggling to manage unprecedented debt levels and economic upheaval, Canada enjoys a stable real estate economy, its real estate markets moving along in a state of near-perpetual equilibrium — at least compared with other volatile regions, including most obviously the U.S. “The rest of the world has taken notice. U.S. retailers are expanding


into the dependable Canadian market, immigration waves stoke growth in housing and condo sales and foreign investors try to gain footholds (most unsuccessfully) in property sectors against diffi cult odds: Canadians tend to buy and hold long term. “But that does not mean that Canada is the perfect real estate haven. Canadians struggle against complacency and must remain focused on the reality that as the world’s tenth-largest economy it can be dragged down by everyone else,” states the pwc report. “For 2013, a balanced outlook


is expected. While Canada may do well compared to other economies, growth trends will be mediocre. But in this case “mediocre” should be viewed as the new “good” as real estate players need to scale back their expectations.” However, the dreaded ‘b-word’ –


Bubble – is on everyone’s lips and the on-going concern is the Canadian market is more overvalued than the American market at the time of its crash. Even in 2011, an Economist study found Canada’s housing prices were overvalued by 29% relative to income, and by 71% relative to rental rates. Canadian national newspaper, the Globe and Mail, puts it this way. “Numbers don’t lie – especially about Canada’s overheated housing sector. Increases in home prices in recent years have not been matched by underlying increases in fundamentals. The market is due for a severe correction. “One particularly telling statistic is housing investment as a share of GDP.


This ratio has steadily climbed toward a record high over the past two years. It is now more than 7 per cent of GDP versus a 50-year average of 5.8 per cent and previous peaks of about 7.26 per cent in the late 1970s and 7.18 per cent in the late 1980s. After residential housing investment as a percentage of GDP peaked in the previous two cycles, the housing market crashed within a few years.”


When we turn to the United States, positive reports about how far its housing market has recovered since the


“The on-going concern is the Canadian market is more overvalued than the US was”


2008 crash are everywhere. The situation has been summed up by the Forbes business website, “The U.S. housing recovery is showing up all over the market these days,” it wrote in April after an upbeat earnings report from government-backed mortgage fi rm Fannie Mae. Typical of the good news is news from the realtor.com website that heralds a signifi cant recovery in the market, ahead of the busiest time of the year for realtors.


The number of homes for sale rose in February over the previous month and is selling faster, according to the latest MLS data.


Median list prices reached $189,900 and sales listings were up 1.15%


OPP EDITORS


www.opp-connect.com | APRIL 2013


News of encouraging recovery from the US abounds, with reports of rising home prices and ambitious projects landing in our inbox almost daily. But while the outlook for the property market in America is sunny, Canada appears to have been left out in the cold – the fear of a bubble is sending shivers down professionals’ spines


month-on-month in February, the fi gures show. Homes also sold faster with a median of 98 days, 9.26% less than the previous month. Going further, Zillow, which publishes the Home Price Expectations Survey, predicted home prices in America will rise 22% on average during the next fi ve years and by 4.6% this year alone. ‘On the ground’ the same message is coming through. In January, Florida developer Garrett Kenny, of Feltrim Developments, told OPP Connect, “The central Florida lion is awake and is making noise again! I defi nitely see prices increasing in 2013.” The new Disney Springs


development announced at the end of March illustrates the optimism in the market and “is just another sign that the ‘big boys’ are heavily investing in central Florida, which in turn means more people looking to buy or rent homes based on the economic output of this one project,” Mr Kenny says. Feltrim – who attended the recent


OPP Tour of China – has seen strong interest from Asia and is launching its Fountains at Champions Gate development at the Beijing International Property & Investment Expo, in April. Just three months after Mr Kenny’s prediction of the Florida lion roaring, the return of new-build projects to the state has been celebrated by investment specialist Torcana, which has just launched the waterfront community of Callista Cay in the sunshine state. The development features 68


new, stylish and comfortable townhomes in Tarpon Springs, near Clearwater and Tampa, priced from US$208,500-US$249,999, up to 50% below 2007 prices. Torcana Director Colin Murphy has told OPP Connect, “Against the backdrop of a strengthening national and local housing market, local Florida builders have begun to dust off their heavy machinery and are digging foundations in new construction sites after a very long hiatus.”


Median new home sales prices in The future’s bright | News of a US recovery is positive for all of us – and all the numbers are steadily climbing!


Florida are up 15% year-on-year, the highest level since January 2008. The median price of homes in Orlando is up almost 20% year on year, adds Mr Murphy. Roll on summer!


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