FORECAST ‘09

With the global financial crisis still sending waves of uncertainty through the

Canadian economy and real estate market, we turn to experts from various parts of the business to help us make sense of it all, and project what might lie ahead in 2009.

There was an article in the Canadian Real Estate Magazine that I found very interesting. It has opened my mind as to where we are today and trying to forecast the future. Not all Canadian real estate investors are experts in global economics, international finance and other complex matters. But they are smart and savvy people who have come to learn that property is a solid investment, perhaps even more so in these current economically challenging times. After all, where would you rather park your money these days - in real estate or in the stock market, mutual funds or other more volatile investment vehicles?
To be sure, with seemingly daily market swings and fluctuations in just about every major financial influence, some calmness needs to be restored amid all the talk of doom and gloom. 
I am going to post a Blog every Monday for the next month or so with some great feedback from top-level executives from the key segments of real estate?  Here are some names you can expect to see: 
• Gregory Klump, Canadian Real Estate Association 
• Bob Dugan, Canada Mortgage and Housing Corporation  
• John Turner, BMO Bank of Montreal
• Michael Polzler, Re/Max
• Phil Soper, Royal LePage
• and several other well-informed real estate experts, including Ozzie Jurock, Don Campbell, Ann Bosley and Brad Lamb.
All told, we hope that bringing these minds together will help us all better understand the true state of the housing market in Canada, and how we can plan for what might happen over the coming year.

Gregory Klump

Chief economist with the Canadian Real Estate Association, Ottawa

CANADIAN REAL ESTATE: How would you characterize the health of the Canadian real estate market at the beginning of the first quarter in 2009?

Gregory Klump: While the Canadian housing market cycle peaked in 2007, national sales activity remains healthy and is on a completely different footing than the US. Mortgage defaults and home foreclosures in the US are soaring; in Canada, they remain very low.
Once all the numbers are out for 2008, it is expected to rank among the best five years ever.

CANADIAN REAL ESTATE: If we accept that Canada's mortgage industry is not in the same precarious position as that in the US, but that the impact of the recent financial crisis originating in the US could have an impact on the Canadian economy, how would you advise Canadians ride out what could be a toughening market?

Gregory Klump: The recent financial crisis originating in the US is affecting mortgage financing, and has made the financial industry increasingly attuned to the supply of and demand for credit. Mortgage interest rates have become more volatile.

CANADIAN REAL ESTATE: What would you do if you had to invest money in the Canadian property market in 2009?

Gregory Klump: The Canadian housing market is still a story about the west and the rest. British Columbia and     Alberta housing markets are now realigning after years of surging housing demand and prices. Large price increases in Western Canada prompted many homeowners to list their home for sale last year, but rising prices also caused home affordability to deteriorate in those markets. More listings means increased competition among home sellers for a more cautious and smaller pool of qualified buyers.
Buyers have more homes from which to choose, and are spending more time shopping. Since sellers by and large are under no financial duress to sell, many are taking their home off the market once the listing expires, electing to put it on the market another day. This trend is forecast to continue playing out over this year, which will stabilize the balance between listings (supply) and sales activity (demand) and prices.    

CANADIAN REAL ESTATE: What do you foresee will be the biggest challenge facing the Canadian real estate market in 2009?

Gregory Klump: Regardless of where we are in the real estate market cycle, there are and will always be challenges and opportunities. The biggest challenge facing the Canadian real estate market in 2009 is the same as that facing real estate markets elsewhere - namely, insufficient financial market liquidity and the risk that real estate financing may become more difficult.

CANADIAN REAL ESTATE: And the biggest opportunity?

Gregory Klump: The biggest opportunity will be in western markets where affordability will improve now that these are realigning after years of unsustainably high price growth.

Canadian Real Estate: What would be your top three tips for Canadian property investors to keep in mind over the next 12 months?

Gregory Klump: 1)Make sure your financials are solid;
2) Focus on long-term investment benefits rather than cashing out tomorrow; and
3) Buy strong properties with prices that you expect to hold if not increase, because if they drop, you'll be competing against other like-minded investors. (Mike Rampf: If you have any questions about this – I can give you great tips and suggestions.)

CANADIAN REAL ESTATE: Final thoughts?

Gregory Klump: As sales continue cooling in 2009 from their breakneck pace of recent years, negotiations no longer
strongly favour the seller. The market has moved from a strong seller's market to a balanced one in which both buyer
and seller have room to negotiate the terms and conditions of the transaction.
When investing money in the Canadian property market in 2009, it's important that investors be in solid financial condition and focus on the long term. Quick flips may not be so quick in a cooling real estate market, causing financing costs to sink expected profits.