|Canada's bubble will not burst says JLL boss|
April 02, 2012 opp.org.uk
Fears that the Canadian property market may be about to crash are unfounded, a leading property agency told OPP this week.
According to Jeff Mayes, the Vice President of Jones Lang LaSalle Canada, there is no prospect of a bubble hitting the Toronto or Montreal markets.
“There is a greater risk of a gentle landing in Toronto,” as prices dip a bit, saysMayes, but “Montreal prices should hold or increase slightly.” Speaking exclusively to OPP, Mayes agreed with scare stories circulating in the Canadian media that the country’s house market is looking vulnerable. “Yes, no question about it, I agree that interest rates and unemployment rates are the 2 most important factors” in keeping confidence levels high, says Mayes.
However, “in Montreal, most of the housing development has been done by small local firms. They have access to good research, (construction starts, absorption rates etc), they are risk averse (they don’t have deep pockets) and we remain in a sellers market.”
“Buyers in Montreal will generally occupy, and are not investors. However this is beginning to change, and fast, as overseas investors are beginning to look at Montreal. Many big projects that have been announced – none come to market yet. With the current pipeline of we will probably move to a balanced market by year-end.” Mayes told OPP that he expects to see “small increases in prices by 2% to 3% over the next 12 months.” He cannot imaging why either of these two important international residential property markets would crash.
If you look at “Toronto,” he says, there is a “massive amount of new build in the pipeline. I do not think the market will sustain recent absorption rates. We are moving to a buyers market quite quickly. I suspect new build condo prices will hold or more likely decrease 1%-2%. Overseas buyers have been purchasing for capital appreciation as rental yields in Toronto barely cover operating expenses, never mind financing.”
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