At Ariston we believe information is power.  Without accurate information you can not properly assess market conditions, nor make prudent or intelligent decisions in business.  Ariston’s blog will attempt to keep you as informed as possible with hard facts, figures and editorials to help you navigate the dynamic nature of the real estate market.

Hard Facts.

These days one can not discuss real estate in any capacity without mention of the US subprime meltdown.  With billions of dollars of equity having been eroded away and the Americans trapped in the worst real estate deflation since the 1930’s it obviously is a major concern for all shareholders of real estate throughout North America and globally.
We all know Canada and particularly the GTA has been relatively insulated from events down south, even aggressively charging upwards in spite of the continuous drop of negativity from our mighty neighbours.

With about One Million Americans walking away from their homes, one may be concerned about the US real estate markets fundamentals. Realistically, this number will probably mere than double before the year is up. But don’t forget that for every mortgage borrowing or foreclosure; there are 10 who are successfull homeowners because of their ability to finance under the US sub-prime system.  Granted, the subprime shakeout is far from over and has spilled over to larger financial institutions who greedily were sucked into the vortex of debt-uploading.  Canada, on the other hand, is vastly different in its foundation and principles within the mortgage market.

Yes the Canadian banks have had their collective hands slapped with billion s dollars in write-down’s but it is merely a fraction of the effect to their American counterparts.  As a matter of fact Canadian households also have little direct exposure to sub-prime lending, accounting for only about 5% of domestic mortgages in recent years compared with over 20% in the United States.

Unfortunately, even through Canadian banks have had only minor exposure relative to their bottom lines, the negative aspect is that most banks have become tighter on the lending side of real estate to some extent.

Overall, however, Canada’s fundamentals are well set to promote even greater property in the real estate market.  With average prices having appreciated by 78% (or 5.9% compounded annually) over the last decade, its comforting to know that major economic indicators offer us confidence going forward.  Canada has been on top of all G7 countries in economic growth, in part, thanks to a surging global demand for commodities and rising resource prices.  The Unemployment rate is at a generational low of 6% due to a booming job market, pushing the employment rate to a record high of 64%.  Additionally we are enjoying higher incomes which are being complemented by historically low interest rates.  Furthermore our population growth between 2001 and 2006 (5.4%) outpaced all other G7 nations combined with the fact that home-ownership is virtually at an all time high.

In actuality the negative influence of the high Canadian dollar and the US economic woes have only had real effect on manufacturing activity, which dropped more than 3 percent in December.  Surprisingly the GTA’s industrial market has held its own, however I believe a shift from manufacturing to warehousing and distribution is definitely underway justifying the increase in industrial construction for 2008. The exploding Condo market is the only area that should be invested into very, very, carefully.  If problems happen, the “A” properties hold their own; however, the “B” and “C” condominiums in less desirable locations are sure to lose some value.

The GTA has always been the beacon of prosperity for real estate and commerce.  That is why so many companies have their presence in or close to Toronto.  It has all the features that are necessary not only for commerce but for good living, hence a good workforce, constantly refreshed by immigration.  Although the southern Ontario area has taken its share of manufacturing and automotive hits, the dynamic resiliency of the region is strong and well positioned to grow in real estate.  Even if other parts of Canada falter, the GTA will continue forward steadfast, just like Manhattan and San Francisco have done in the battered US Markets.

The single most important caveat is regarding what world capital markets do, if oil or financial sectors blow up, then real estate will also be affected in some capacity.  But as we all know, change means opportunity, especially in real estate. Canada has low interest rates, running the only federal surplus of all the G-7 nations and has the lowest debt-to-GDP ratios as well. This will give the Federal government the room it needs to stimulate the economy should the U.S. recession drag us down. Overall, is there any other place you would rather be than here?    Go CANADA!!