Commercial Real Estate News Blog

but it's not a bubble economists say

Canada's housing market is on the rebound after a decline in 2009 with resales expected to set a new annual record this year and home building is off to a strong start, according to two reports Monday. There in't a bubble because of a lack of speculation in the real estate market, said Scotiabank senior economist Adrienne Warren.

Prices are being driven by more buyers than sellers, not unexpected with a tight supply, and buyers may be overpaying a little in some markets, she said. "We don't think there's a bubble," she said from Toronto.

The Canadian Real Estate Association is forecasting resales for homes will set a record in 2010, largely driven by activity in the first six months of this year.

The resale housing market is expected to reach 527,300 units this year, up 13.3 per cent from 2009. This would be a new annual record, up 1.2 per cent above the previous peak in 2007, CREA said Monday.

"You are not hearing about a lot of speculative buying," Greg Klump, the national real estate organization's chief economist, said from Ottawa. "Nor is there a lot of speculative building."

Low interest rates and buyers wishing to avoid the harmonized sales tax before it comes into effect in Ontario and British Columbia will help fuel resales in the first half of this year, he said. In the second half of 2010, sales are expected to be lower as interest rates are expected to increase marginally, Klump said.

New housing starts have also gone up, according to figures Monday by Canada Mortgage and Housing Corp. The seasonally adjusted annual rate of housing starts reached 186,300 in January, up 5.8 per cent from 176,100 in December. CMHC reported actual housing starts for 2009 totalled 149,081 units, with activity improving as the year progressed.

TD Bank economist Pascal Gauthier said there's talk of a bubble because of how strong housing markets have rebounded after the economic downturn. "Our expectation is that it will not be sustained. The market will cool off. You could only really have a bubble if that was to continue," Gauthier said. Gauthier said he expects housing starts to cool off by mid-year.

The CMHC said urban starts increased 4.4 per cent to 165,200 in January. Urban multiple starts rose 5.7 per cent to 76,300, while single urban starts increased 3.3 per cent to 88,900.

The improving market comes as the federal Competition Bureau said Monday it's challenging rules imposed by the Canadian Real Estate Association, a body that represents nearly 100,000 real-estate brokers, agents and salespeople.

The federal agency says the CREA rules limit choices for consumers and force them to pay for services they don't want, also stifling innovation in the market for residential real estate services.

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Federal watchdog challenges real estate MLS rules.

The Canadian Competition Bureau says it’s challenging rules imposed by the Canadian Real Estate Association, a body that represents more than 98,000 real-estate brokers, agents and salespeople. The federal agency says the CREA rules limit choices for consumers and force them to pay for services they don’t want, also stifling innovation in the market for residential real estate services.

CREA represents more than 98,000 real-estate brokers, agents and salespeople operating through more than 100 local boards and associations.

The Competition Bureau is challenging CREA rules imposed on agents who list properties on the association’s Multiple Listing Service, also known as MLS.

The agency says most real estate transactions in Canada make use of the MLS system, which includes information available only to CREA members.

But under CREA rules, according to the Competition Bureau, agents are forbidden from offering consumers the option of simply paying a fee to list a home on MLS.

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Competition Bureau Seeks to Prohibit Anti-competitive Real Estate Rules

OTTAWA, February 8, 2010 — The Competition Bureau announced today that it will challenge rules imposed by the Canadian Real Estate Association (CREA) that limit consumer choice and prevent innovation in the market for residential real estate services.

The Commissioner of Competition has determined that CREA’s rules restrict the ability of consumers to choose the real estate services they want, forcing them to pay for services they do not need. The rules also prevent real estate agents from offering more innovative service and pricing options to consumers. The Commissioner’s application to the Competition Tribunal seeks to strike down these anti-competitive rules.

“Selling a home is one of the largest financial transactions that most Canadians make in their lifetime,” said Melanie Aitken, Commissioner of Competition. “Consumers should be able to choose which services they want to buy in order to facilitate that transaction, including lower-cost options. While the Bureau would have preferred to resolve this matter amicably, CREA’s leadership was unwilling to agree to changes that would have opened up competition, and offered options for consumers and real estate agents.”

The Bureau’s challenge is against rules imposed by CREA on agents who list properties on the Multiple Listing Service (MLS) system. The overwhelming majority of real estate transactions in Canada make use of the MLS system, which includes important information available only to CREA members. Before listing a property on MLS, agents must agree to comply with CREA’s restrictions on the service options they provide to Canadian consumers.

For example, under CREA’s rules, agents are prohibited from offering consumers the option of simply paying a fee for an agent to list a home on the MLS system. Instead, all consumers looking to list a property on MLS must purchase a pre-determined set of additional services from a real estate agent, such as the presentation of offers and negotiation of a final deal.

“The Bureau is focused on striking down these anti-competitive rules, so that real estate agents wishing to offer innovative services can do so, and consumers can benefit from greater choice,” said Commissioner Aitken. “While the market will ultimately determine prices for residential real estate services, we expect that if the Tribunal strikes down the anti-competitive restrictions, there will be downward pressure on real estate fees in Canada.”

Once filed with the Competition Tribunal, the full text of the Bureau’s filing will be available on the Tribunal Web site.

The Competition Bureau is an independent law enforcement agency that contributes to the prosperity of Canadians by protecting and promoting competitive markets and enabling informed consumer choice.

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