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Canadian Property Market May Be Cooling Too Fast

News Posted On: 16 July 2010

The Canadian housing market slowdown continued in June, which should be a good thing given that most analysts feared a bubble had been forming in the market, but the slowdown does seem to be maybe more drastic than the government would have intended with its measures.

According to the Canadian Real Estate Association's latest report, seasonally adjusted home sales in June were down 8.2%.

"With interest rates on the rise, housing affordability and home sales activity are expected to continue to erode over the second half of 2010," Gregory Klump, the Canadian Real Estate Association's chief economist, said in the report.

According to the Bank of Montreal, house sales are now 25% down on the peaks seen at the end of last year.

The CREA recently updated its forecast on the market to predict a sharp downturn in the Canadian housing market. At the time it seemed unlikely, but now it is coming true.

As predicted in the updated forecast, the government's incentives such as low interest rates and tax-credits led to many buyers pushing forward their plans to buy houses, which had the desired effect of increasing sales. Unfortunately the buyers who bought at the time, were those who, without the incentives would have bought later in the year. This has obviously left the market without buyers now that the incentives are gone.

There are similar stories in markets and economies around the world as it now looks like most government stimulus programs never prevented the recession from taking its full toll, they simply spread out the damage it would do; prolonging the agony some might say.

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