Banking on Real Estate in Canada
Banking on Real Estate in Canada, but is it sustainable?
Real estate has been a traditional way to bank your cash privately as a rising long term asset protection. Many investors also see this as an income producing asset with rents returning better than what the banks can provide.
Banking on Real Estate
In the second quarter of 2009 Canada’s real estate activity and prices has risen significantly especially in the larger urban centers like the Greater Toronto Area (GTA). Canada and most of the rest of the world is in a deep recession But sales of real estate has been much higher than expected. In fact, the surging activity has Ottawa and the Bank of Canada talking about putting on the brakes, but a mild one at that.
First-time buyers attracted by historically-low interest rates sent the number of sales much higher than expected in several markets. But is it any wonder when the faith in the equities market has taken such a beating, those with some cash to spare will also turn to real estate as a wealth preserver?
In some markets, prices returned to pre-recession highs. The Canadian Real Estate Association says stronger sales in higher-priced markets have skewed the average price higher.
They revised its sales outlook twice during the year to reflect the stronger activity. It suggests the number of sales and average prices will continue to rise in 2010.
Reasons for Real Estate Price Rise
Even cautious investors have decided to take the plunge and buy real estate. The most important reasons appear to be based on the larger urban areas like the GTA.
* Large steady population increases creates a steady rise in demand for real estate.
* Commuting wastes time and resources, so many are now buying closer to work. That creates more local area demand for larger population centres.
* Interest rates are historically low for mortgages.
* Large first time real estate buyer pool. (Mum, Dad and grandparents may also be shelling out financial support for first time buyers).
* Large net immigration (from other countries or even from other parts of the country) into large population centres like the Greater Vancouver Area and Greater Toronto Area.
* Even with the retiring baby boomer population, their more active lifestyle and longer life span may simply create a different kind of housing demand.
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