Briefly:

(May 15, 2008) Canada’s nationwide love affair with the real estate market appears to be cooling off, according to a report out of Scotia Economics.

So far, the price decline of existing homes is visible only when inflation is factored in, as price increases in nominal terms have eased to single digits on a national basis, according to the latest Real Estate Trends report.

“We expect overall sales volumes in 2008 to total about 15% below last year’s record levels, and home prices to increase on average by about 5%,” said Adrienne Warren, senior economist, Scotia Economics. “Price gains should slow further in 2009 with the return of a balanced market for the first time in a decade.”

The slowdown could soon affect the construction industry, as unsold inventories climb and applications for new building permits fall. Warren predicts that annual new housing starts will fall from the current 225,000 to 180,000 by the end of the decade.

Perhaps not surprisingly, the cooling effect is most evident in the markets that were the hottest in recent years — Calgary and Edmonton, where buyers may soon be in better control of the market. Alberta’s loss may be Saskatchewan’s gain, however, as Regina and Saskatoon are expected to take over as the fast growing urban housing markets.

Despite the overall slowdown, the risk of a U.S.-style collapse in home values is considered low.

“Home prices in Canada are not substantially overvalued,” says Warren. “Our long-term housing price model puts average home prices in 2007 at about 8% above their long-term trend. Recent International Monetary Fund estimates placed Canada at the bottom rungs of international home price overvaluation.”

Sprott hits the market

(May 15, 2008) One of Bay Street’s most anticipated initial public offerings has been completed, with Sprott Inc. coming to market at $10.00. Shares in Eric Sprott’s asset management firm are trading briskly on the TSX, sinking more than 3% in the first hour.

The IPO has raised $200 million so far, but there is an over-allotment option for underwriters to buy up to 3 million additional common shares at the IPO price.

The underwriting syndicate for the offering was co-led by Cormark Securities and TD Securities and included CIBC World Markets, RBC Dominion Securities, Scotia Capital, BMO Nesbitt Burns, GMP Securities, Canaccord Capital, National Bank Financial, Jennings Capital, Paradigm Capital and Clarus Securities.

(05/15/08)

Staff

The staff of Advisor.ca have been covering news for financial advisors since 1998.