Housing-bubble fears overinflated, sector has 'solid foundation,'
Prices over the next decade will rise at an average of three per cent per year.
Carl Gomez of TD reports, Wednesday, April 27, 2005
Excerpts...
TORONTO (CP) - The TD Bank economics department has soothing advice for homeowners who can't decide whether to be gratified or horrified by the high prices neighbouring homes are selling for: Don't worry, be happy.
Fears of a housing bubble are overblown, says a bank study released Wednesday.
Price increases are not being driven by speculative buying, and concerns are exaggerated about the weight of debt owed by homeowners, the rapidity of condominium construction and the possibility of a future market crash as empty-nest baby boomers rush to sell their homes, according to the TD paper, entitled Bursting Aspects of the Housing Bubble Myth.
"Canada's red-hot housing market is on a solid foundation because there is very little evidence of speculative activity," commented TD economist Carl Gomez.
The study foresees a "modest cooling" of the housing market this year and next.
That's in line with the expectations of many other economists, after a decade in which the average Canadian home price increased by 53.7 per cent, according to figures from Re/Max Canada.
The TD report says most homeowners would not be badly hurt if interest rates increased, adding that a substantial rise in borrowing costs is unlikely.
"Inflation is not the monster that it was in the late 1980s, and that means that rates should only rise at a measured pace once the Bank of Canada begins its tightening cycle," Gomez said.
As to fears of overbuilding in the big-city condo market, the TD study finds sound economic reasons underlying the boom.
"Higher land prices in places like downtown Toronto and Vancouver put a premium on the price of single detached housing in these areas," Gomez said.
"But condos keep home ownership accessible to many potential buyers like younger people and recent immigrants."
And as the oldest boomers reach retirement age, there are worries that home prices will collapse as this large demographic group unloads family homes to a smaller pool of younger buyers.
Gomez counters that not all baby boomers will be retiring at the same time, as they now range in age from 39 to pushing 60.
"So while older boomers may be pondering retirement, their younger counterparts with growing families will still be looking to trade up to larger homes. This should help to keep the housing market broadly in balance."
He adds that aging boomers "are likely to reshape the types of housing that will be in demand over the next two decades but they are unlikely to cause a deep correction in prices."
In sum, housing should remain a sound investment, the TD study concludes, predicting that prices over the next decade will rise at an average of three per cent per year.

Canada New immigration plan to clear backlog
CBC News, Mon, 18 Apr 2005
OTTAWA - Citizenship and Immigration Minister Joe Volpe on Monday announced a new $72-million plan aimed at helping immigrants reunite with relatives and clear a giant backlog of applicants.
Part of the plan is designed to help those who want to sponsor their parents or grandparents, a process that immigration lawyers say can take between five and 10 years. Volpe said the new plan will should clear more than 100,000 applications off the book.
Citizenship and Immigration Minister Joe Volpe in Brampton, Ontario, Monday. Key aspects of the immigration plan include: