TORONTO, Feb. 25 /CNW/ - In a presentation earlier today moderated by
Scotiabank's Managing Director of Mortgages, Charles Lambert, Scotiabank's
Chief Economist Warren Jestin and Senior Economist and real estate specialist
Adrienne Warren were joined by Phil Soper President & CEO of Brookfield Real
Estate Services to share their views on what 2009 has in store for the
Canadian economy and the Canadian real estate market.
During the forum, held in Toronto, keynote speaker Mr. Soper addressed
the role that first-time home buyers will play in the Canadian real estate
market recovery. Mr. Soper observed, "Like credit markets, the residential
real estate industry requires the free flow of properties between sellers and
buyers to function efficiently. First-time home buyers, the largest single
buying segment, have been sitting on the sidelines in increasing numbers since
it became obvious last fall that Canada was not going to avoid the global
recession. Significantly lower cost of ownership should bring the first-timer
back to the kitchen table in increasing numbers this year, which would get the
overall industry moving again."
According to Mr. Soper, several factors should encourage the first time
home buyer to enter the housing market in 2009, including:
- targeted government incentives;
- lower-priced homes;
- historically low mortgage interest rates; and
- reduced risk through the return of the conditional offer.
Ms. Warren shared her outlook for the residential and commercial real
estate market and discussed how the home renovation industry may be affected
by the economic downturn. Ms. Warren noted, "While home sales and construction
in Canada seem sure to turn down further in 2009, the outlook for renovations
is somewhat mixed. The industry has been growing rapidly in recent years, with
inflation-adjusted outlays rising an average of 8.5 per cent annually this
decade, three times faster than overall GDP growth."
- Residential activity in Canada should moderate further in 2009
alongside a general weakening in domestic economic conditions.
Housing starts are forecast to fall to around 155,000 units, below
longer-term replacement demand, with declines across all provinces
and in both multi- and single-family segments.
- In the United States, given historically high inventories of unsold
homes, and record foreclosures as sub-prime and adjustable rate
mortgages reset, U.S. builders are expected to remain extremely
cautious. Starts for the year are forecast to total just 550,000
units, a post-war low.
- Office market activity in Canada is expected to cool in 2009 after
several years of strong growth. Demand for office space is weakening
alongside slowing office-based employment (e.g. finance, mining,
engineering and information-technology services), tighter credit
availability and sharply lower institutional investor activity.
Mr. Jestin opened the forum with an overview of prospects for the
Canadian and global economies in 2009. "The synchronized downturn underway in
developed and emerging economies will extend through much of 2009 and is
likely to be followed by a prolonged period of recuperation that may linger
beyond 2010. While domestic economic, financial and fiscal fundamentals are
stronger in Canada than in the U.S. and many other nations, overall activity
will continue to be dragged down by deteriorating export markets for motor
vehicles and commodities."
- Although Canadian prospects have been downgraded considerably, the
economic setback is expected to be less severe than in the United
States and the ensuing recovery relatively stronger.
- The sharp downward revision in Alberta's real GDP this year reflects
the sizeable retrenchment in capital spending on oil sands projects,
the hefty drop in drilling activity for natural gas, and substantial
declines in housing and retail activity.
- Ontario will underperform most national performance measures this
year and next. Manufacturing is being downsized by the significant
retrenchment by auto assemblers and other machinery & equipment
producers in response to a sharp fall-off in demand.
A replay of the conference call is available by calling 1-800-408-3053
(local: 416-695-5800) and entering passcode 3281894. A copy of the report and
presentation can be found on the economics page of www.scotiabank.com.
Scotia Economics provides clients with in-depth research into the factors
shaping the outlook for Canada and the global economy, including macroeconomic
developments, currency and capital market trends, commodity and industry
performance, as well as monetary, fiscal and public policy issues.
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