Very interesting article from the Canadian Press:

(January 07, 2011 )

TORONTO - The Canadian real estate market will follow a similar pattern in 2011 as 2010.  Buyers will make purchases in the early months in anticipation of higher interest rates, according to a report from one of Canada's largest real estate firms.


The aftershocks of the recession, including a lingering low interest rate environment, will continue to influence the Canadian real estate market in 2011 — a year that will be stronger than expected, said the report released Thursday by Royal LePage.


They predict that average home prices will rise 3% in 2011, driven largely by a rush to buy in the first half of the year.


“Canadians realize that interest rates are unsustainably low and that homes will become effectively more expensive when mortgage rates return to normal levels," said Phil Soper, president of Royal LePage. “2011 is expected to unfold much like 2010, when close to 60 per cent of sales volume occurred in the first half of the year in anticipation of interest rate increases that never materialized."


The number of transactions may be slightly lower than 2010 when the tightening of mortgage qualification rules and the introduction of the HST in Ontario and British Columbia affected purchases.


Soper said the extension of low mortgage rates will be an unexpected boon to the market this year.  “Like many Canadians, we anticipated an end to the ultra-low interest rate era before year-end 2010," he said.  "Paradoxically, global economic weakness, particularly in the U.S, allowed policy-makers and financial institutions to keep borrowing costs low, resulting in a stronger Canadian housing market and a better than forecast fourth quarter.”


Average house prices rose between 3.9 per cent and 4.6 per cent in the fourth quarter of 2010, while price appreciation is expected to continue a moderate and steady climb throughout the current year.


The report contrasts with some recent predictions by economists that prices should remain flat or decline over the next year.


According to John O’Bryan, vice chairman of CB Richard Ellis Canada We‘ve had good news over the past twelve months with respect to interest rates, housing trends and employment gains, with many companies announcing plans for expansion.  He said, "2011 may well be another good, stable year but should be viewed with cautious optimism in light of the concentration in employment growth on part-time jobs rather than the full-time positions that indicate confidence in long-term, sustainable growth."