This editorial contains forward-looking statements
‘Tis the season for two things: cocktails and clairvoyancy. Experts are releasing their forecasts on how every facet of the economy is going to perform in 2008, predictions that share space with flavoured vodka or dry martinis on our lips as we bounce from one party to another during this over-scheduled season. Find a cluster of three or more people in a room during one of these holiday gatherings and you are more than likely to hear the conversation at some point turn to real estate.
The pessimists who believed 2007 would be a cooling period missed out yet again. The year 2007 will go down as one of the best in the past decade, and there is no reason to suggest that 2008 will not follow course. For example, Scotiabank has predicted that the value of Canada’s construction boom will surpass $200 billion in 2007 for the first time. In its latest Real Estate Trends it said that non-residential construction will more than offset any potential slowdown in residential homebuilding in Canada, maintaining the industry’s position as a major driver of domestic growth. Adjusted for inflation, spending on construction projects, including residential housing, non-residential buildings and engineering structures such as roads and dams, has increased at an average annual rate of close to six per cent since the mid-1990s, almost twice the advance in the overall economy.
Of course everyone is wondering what long-term impacts the sub-prime mortgage lending crisis in the United States will have north of the border. The 29th annual Emerging Trends in Real Estate 2008 report, released by PricewaterhouseCoopers and the Washington D.C.-based Urban Land Institute, cast its eyes on the Canadian market for the first time, and concludes that Canadians should be upbeat. Although they predict the U.S. commercial real estate market will slow in 2008 and follow a similar pattern as the current residential market, Canada benefits from a more conservative investment environment than the U.S., according to Chris Potter, PwC partner and leader of the firm’s Canadian real estate tax practice, pointing out that in Canada, “institution-dominated markets appear to be avoiding ‘transaction mania’, but real estate values have reached record highs and a strong economy has accelerated tenant demand for space.”
Tempered optimism is how one might characterize the Canada Mortgage and Housing Corporation’s assessment of Canada’s residential market performance in 2008. In their fourth quarter Housing Market Outlook, Canada Edition report the CMHC expects residential construction to decline to about 214,000 units, yet despite this drop, 2008 will mark the seventh consecutive year in which housing starts exceed 200,000 units. “Continuing high employment levels, income gains and low mortgage rates have been a boon to Canada’s housing markets. Despite this, however, housing starts are expected to decrease in 2008,” says Bob Dugan, chief economist at CMHC. “The pull back in housing starts next year will be mainly due to the increases in house prices in recent years, which have pushed mortgage carrying costs higher.”
Expanded coverage of both the Emerging Trends in Real Estate 2008 and Housing Market Outlook, Canada Edition, two highly regarded annual industry reports, can be found in this issue of Building.
The holiday season prompts reflection and predictions: the predictions appear encouraging, and the reflection brings to mind a refrain sung by ol’ Blue Eyes, “It was a very good year.” So as 2007 draws to a close, we at Building magazine wish all our readers a successful and satisfying 2008.
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