2009
M arke
Housing
Here we go again.
After the longest period of economic expansion since the
SecondWorld War and almost a decadeof upward pressureon
, me n tu m h a ss l o w e di n vi rtual l y
r eales t at eva l u e smo
re si d ent ial
a l l h o u s ingm ar k et sacro s sth e c o u n try .
5320,000
5100,000
5280,000
5260,000
5240,000
5220,000
It's the cyclical nature of our business.We move ten steps
forward and take three stepsback. But in spite of severalboom
a n d b u s t m ar k et s t, he v a l u e o f a n a v e ra g eC a n a d i anhome has
h e l d u p r em ar k ablyw e l l s i n c e 1 9 8 0 . Pri c eh a s o n l y dropped
four times in the past 27 yearsand the declineshave typically
b e e n modes tand v al u e sb o u n c e db a c ka l m o s ti mmedi atel y'In
fact,we have not experiencedtwo consecutiveyearsof decline
5
5140,000
5120,000
580,000
560,000
198081 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 91 98 99 00 01 02 03 04 05 06 07 082009
si n ce1 980.
Wh i l e nat ional hous i n g ra te s h a v e b e e n a p i c tu re of stabi l i ty, av er age hous in g v a l u e s i n O n ta ri o h a v e s een sl i ghtl y
more volatility over the past 27 years.There have been six
s120,000
5100,000
5280,000
decreasesin averageprice noted, with five of the six occurring
b e tw een 1990 and 1 9 9 6 . P ri c e sfe l l 1 7 p e r c e n t duri ng that
time frame,after climbing a phenomenal70 per cent between
1 9 8 6 and 1989. Re s i d e n ti aal v e ra g ep ri c e h a s been on an
5260,000
u p w ar d t r ajec t or y s i n c e 1 9 9 6 - th e l o n g e s t u n i nterrupted
p e ri odof gr owt h s inc e1 9 8 0 .
5160,000
5240,000
5220,000
5200,000
5180,000
5140,000
$r20,000
580,000
The past has been kind to those folks who have invested in
r eales t ate .Bu t th e fu tu re i s b ri g h t a s w e ll ,despi teal l
re si d ent ial
th a t you hearand r e a dth e s ed a y s .C a n a d ai s i d e a l l yposi ti oned
560.000
198081 82 83 84 85 86 87 88 89 90 91 91 93 94 95 96 97 98 99 00 0l 02 03 04 05 06 i
to weatherthis storm.
Fi rstof all, our ex po s u reto s u b p ri m ei s l i m i te d .T he C anadi an
subprime market accountsfor less than five per cent of the
residentialmortgage market. One-quarterof one per cent of
mortgages are in arrearsin this country' That'sa far cry from
th e sit uat ions out h o f th e b o rd e r,w h e re n e a rl yth re e mi l l i onU S
householdsare expectedto be in foreclosureby year-end2009.
als ohav em o re e q u i ty i n th e i r h o me s .Accordi ngto a
C a n adians
2008 report issuedby one of the charteredbanks,home equity
i s e qual t o alm os ts e v e n typ e r c e n t o f th e v a l u e sof resi denti al
p ro per t y- up about fo u r p e r c e n t fro m 1 9 9 8 . In th e U S ,home
e q u it y hasbeen gr ea tl yd i m i n i s h e di n re c e n ty e a rs'
981
99:1
00:'l
n Avefageof
majoflende6
01:1
02:1
n8l
0l:1
i- : i I k of (anada
i0! 15: V c-B-t€la (5 ls:f,
-':'
Outlook
An d fi nally hous
,
ingv a l u e se, s p e c i a l l iyn O n ta ri o ' sm a j orcentres,
yeard i d n o t ex per ienc e
s er i o u sd, o u b l e -d i g i tp ri c ea p p re c i ati on
after-yearfor an extendedperiod. Ontariomarketswere in large
part characterizedby stable,healthygrowth.
But the realpillarof strengthfor the housingmarketin the prov. tw e e n2001and
i n cewill be im m igr at io ni n th e c o m i n gy e a rs Be
2 0 0 6 , m or e t han 1. 1 m i l l i o n i m m i g ra n tsc a m e to th i s country
a n d mo r e t han half s e ttl i n gi n O n ta ri o . Al th o u g hth at percentage has fallen to under 45 per cent over the past two years,
On ta ri o s t ill enjoy s a s te a d y i n fl u x o f i mmi g ra n ts,w ho w i l l
eventually become homeowners. For the housing market to
h a ve sound f undam en ta l sth e re mu s t b e s tro n ga n d sustai ned
demand for housing,and long-term population growth is key.
So wh e n we t ak e a c l o s e rl o o k a t h o u s i n g m a rk e tfundamentals we realizethat we are in a much better positionthan most
co u n trieswor ldwide.
We a l s o k now t hat C a n a d i a n sc a n n o t b e d e te rred from
homeownership.lt's woven into the very fabric of this country.
Accordingto Statscan,approximately68 per cent of Canadians
o w n a hom e. T he E as tC o a s th a d th e h i g h e s th o me ow nershi p
rates in the country, led by Newfoundlandand Labradorat a
rate of 78.7 per cent and followed by New Brunswickat 75.5
per cent and Prince Edward lsland at 74.1 per cent. Alberta
and Saskatchewan
hover at 73 and 72 per cent respectivelyand
On ta rios t andsat 71 pe r c e n t. O w n i n g a h o me i s a p r i ori ty- up
th e re w it h get t ing m a rri e da n d h a v i n g k i d s - a n d someti mes
it ranksfirst.
We know from experiencethat real estate traditionally appreciatesat a rate of five per cent annually.Although that
figure varies by city and province,no matter how you slice it,
owning your own home is an investment strategy that is
difficult to argue with. As we head into a slower period, the
return may not be as significant, but the investment in
h o me o wner s hipis s t il lo n e o f th e s a fe s vt o u c a n m a Ke.
YoucantliveinanRRSP
isyour
Estate
Real
bestInvestment.