The Canadian housing market is passing through a phase of slump with only 187,500 people took loans in December, 2007 due to a steep hike in interest rates and tougher mortgage qualifications.
The Canada Mortgage and Housing Corporation (CMHC) reported that housing loans were taken up by only 187,500 people in December 2007, a dip from 233,300 in November 2007. Nevertheless, despite the low of December 2007, the year (2007) registered a 1% increment from 2006, which had settled at 229,600, and just brushed close to the 2004 record, reported Thestar.
The primary reason for this decline is attributed to the rapidly climbing interest rates and the 7.59% interest being charged upon five-year closed mortgages in December 2007. These are the highest rates since August 2001. Homeowners have still not been able to materialize their credit crunch, but they are compelled to shell out more money due to higher interest rates, along with higher home prices, jointly taking a toll upon affordability.
It has also become increasingly tougher to be eligible for mortgage due to a steep rise in mortgage foreclosures, thereby dumping more homes upon an already devastated market coupled with tighter money lending standards followed by banks. Other reasons for the debacle of the Canadian housing segment would be the inclement cold weather during December 2007 and the implementation of the new land-transfer tax in Toronto.
Still, considering the total figures, it is clear that Canada’s housing development market in 2007 was in great demand and in want of new homes. Industry analysts say that the causes behind the low figures of December 2007 were temporary in nature and would soon disappear during January 2008.
As per CMHC, the net growth of the housing industry in 2007 was propelled by solid employment, income growth, low mortgage rates, and high consumer confidence levels. Projections for the housing industry in 2008 remain strong at 214,300 units, making it the seventh successive year with 200,000 units or more.
A Research Analyst at RNCOS said, “The Canadian housing industry suffered a slump in December 2007 because of unfavorable conditions for new housing constructions. However, the total performance of the market consoled dealers, especially with the mortgage rates in their favor. Therefore, the future of the Canadian housing industry is quite strong and reassuring.”
Related Market Research Reports:
Opportunities in Indian Housing Sector (2006-2007)
