By Jonathan Chevreau – National Post

Despite gloomy prognostications from certain authors and pundits, thus far Canada has eluded the real estate collapse suffered by Americans. A survey released today from PricewaterhouseCoopers and the Urban Land Institute confirms that conservative banking practices and stricter regulation helped keep excessive lending in check. As a result, “most Canadian real estate investors were saved from overleveraging.”

Even so, Canadians are still worried about suffering further economic shocks if America can’t get its financial act together, PwC warns. The report, which takes input from some 900 real estate experts, developers and consultants on both sides of the border, finds total value losses in Canada will average 10 to 20% off previous highs but warns “some markets and sectors could suffer steep losses.”

Comment: How can losses average 10-20% when average prices are up? If houses are worth more today than ever, across the nation, where are the value losses? That makes NO sense whatsoever…

Frank Magliocco, leader of the PwC Canada Real Estate practice says the conservative approach has paid dividends for Canadian real estate players. While sideswiped by the U.S. fallout, “they experienced a manageable market correction rather than a full-blown credit crisis-precipitated market meltdown.”

A mild buyers market

The Emerging Trends 2010 investment barometer forecasts a “relatively stable” transaction market that’s slightly in favor of buyers over sellers. Across Canada, apartment investments get a rating of 5.44 out of 10 [slightly above a “fair” rating], while office is at 5.04, retail at 5.0, industrial/distribution 4.68 and hotels at 3.69. Development prospects are no better than 3.74 in any segment with hotel development prospects at a low 2.68.

Comment: Buyers market? Are they on crack? Pretty much every major market in Canada is in serious sellers market territory. How and why is that going to change?

Condos may stall until prices firm in Vancouver & Toronto

PwC partner Lori-Ann Beausoleil expects developers to curb their activity as bankers rein in construction loans in light of softened demand. “Certain condo projects will likely stall out until residential prices firm up in Vancouver and Toronto.”  While office markets in major U.S. cities are suffering from double-digit vacancy rates, Canadian markets are averaging only 8% vacancies.  Builders in Calgary are experiencing a supply surge as demand wanes from deflated energy companies. Some smaller residential developers may be in “over their heads” in Toronto but Beausoleil says there could be an opportunity for larger more experienced players with solid lender relationships to take over some struggling projects.

Rush of condo and single-family home sales before HST kicks in

Comment: How are condos going to stall when there is a rush of sales predicted?

Vancouver is viewed as the strongest market but “many wonder what will happen after the Olympics.” Toronto has better investment prospects than development prospects: single-family home and condo buyers are rushing to make deals before the harmonized sales tax comes into play on July 1st: developers fear a subsequent drop-off in demand afterwards.

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Contact Laurin Jeffrey for more information  –  416-388-1960

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