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DONT GET TAKEN IN BY THE PROPHETS OF DOOM: HOUSING PRICES IN MOST CANADIAN MARKETS ARE LIKELY TO RISE AGAIN THIS YEAR. HERE'S WHY.
Michael Polzler isn't losing sleep over the Canadian real estate market yet. Sure, crashing housing prices in the United States have the executive vice-president and regional director of Re/Max Ontario-Atlantic Canada worried. But Canada is still pretty safe. Unemployment is near its lowest levels ever, the dollar is near par with the greenback, and our resource-rich economy is doing well by most measures. What would cause him sleepless nights? Polzler thinks a while before answering. "If we started to see an abundance of properties coming onto market and the length of time they were on the market really started to increase," he says. "That has not happened. Yes, we can see it softening, but you have to remember we've been running at 100 miles per hour."
A slowdown might even be a good thing, especially for anyone who is looking for a first home, who needs to find housing quickly-or who's looking to invest in property without getting sucked into a multi-bid price war. While Canadians are generally not big buyers for investment purposes, real estate has been one of the safest plays during the past 40 years or so-returning roughly 5% a year, for a real rate of return of just more than 2%. That's despite several significant market downturns, the most recent of which was in 1994-1995; the last big one was back in 1989-1991.
But there are those-like MP and would-be Nostradamus Garth Turner-who are sure we're due for another big one. Turner's latest book, Greater Fool: The Troubled Future of Real Estate, is filled with dire scenarios of Canadians losing just about everything they've sunk into their homes. Homeowners, to be sure, have a lot riding on what is the biggest investment most will ever make. Canadians' net worth in residential real estate rose 4.7% in the fourth quarter of 2007 at an annualized rate, reports National Bank Financial, while it fell 11% for Americans during the same period. And the Canadian wealth effect should only increase. Nearly four of every five Canadian homeowners say they want to pay off their mortgages as fast as possible,...