RICS Global Real Estate Weekly Comment: Canadian House Prices to Edge Closer to All Time High (Plus News on UK, Germany, China)

04/09/2010 17:04

The coming week promises to be a busy one for both property and macro economic data releases. The numbers and surveys due out are likely to reinforce the encouraging picture painted by the surprisingly strong January GDP figure which, on a year on year basis, moved into positive territory for the first time in sixteen months. The generally more upbeat economic climate is, meanwhile, also being reflected in a pick up in inflation with the core rate moving above 2 percent in February for the first time since the back end of 2008. Nevertheless, the expectation is still that the Bank of Canada will stick with its pledge to hold policy steady until July; interest rates currently remain at just 0.25 percent. Monday, April 12, sees the publication of March housing starts figures as well as both the Q1 Business Outlook Survey and the Senior Loan Officers Survey from the Bank of Canada. The February housing starts data provided further convincing evidence that the residential sector is a key engine of the wider recovery now underway. On an annualized basis, new starts jumped to 196,700 which was the best level since the tail end of 2008. Although the firm upward momentum may persist in the near term, new rules are coming out on April 19, 2010, which could have some impact on the new build sector. These rules will require, amongst other things, borrowers to have the resources to qualify for a five year fixed rate mortgage even if they would prefer to purchase a lower cost variable rate product. On Tuesday, April 13, 2010, house price data for February is published and this will be followed on Thursday, April 15, 2010, by March existing homes sales and Q1 non-residential construction numbers. House prices rose by 0.4 percent in January, the sixth consecutive monthly gain. There continues to be a significant divergence between the trend in western Canada where prices are still falling, albeit less rapidly than was previously the case, and the rest of the country. The January numbers showed the first year on year increase in national house prices since December 2008 and left the headline index just 1.3 percent away from the all-time high. Read the full Global Real Estate Weekly Comment here.