Will Canada's housing boom last?

Over the past year, house prices have risen by an impressive 9.8% across Canada with price increases of between 1% and 7% from Ontario to the Atlantic provinces boosted dramatically by a 50% hike in Alberta, the centre of Canada's booming economy.

Canadian property market: demand goes west

Record energy prices have swelled the coffers of the oil-rich province, as 42,000 people were lured there by high-paying jobs last year up from 11,000 the year before. The resulting increase in population has put pressure on local housing stock, particularly in the cities of Edmonton and Calgary, where prices rose last month by 4.7% and 6.9% respectively, against 1.4% for the rest of the country. And while the rising cost of construction materials and labour is affecting prices across the country, a surge in demand and a "shortage of suitable building plots also put pressure on prices" in Alberta's two largest cities, says CBC News.

In marked contrast to modest price increases across the rest of the country, in Alberta and the west "extraordinary demand levels [are] far surpassing available inventory as significantly higher incomes allow newly confident buyers to begin splashing out", says Phil Soper of Royal lePage Real Estate services on Canada Newswire. "The energy boom continues to bode well for the housing market in Alberta," says Scott Roberts in the Globe and Mail.

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Canadian property market: will increases continue?

So as Canadians migrate west en masse, should we be equally optimistic for the years ahead? Not necessarily, say some. New home construction is expected to reach a record 49,000 units next year in Alberta, reports the Globe and Mail, dropping to 45,000 units in 2007, according to the Canada Mortgage and Housing Corporation, "as the rising cost of ownership bites into demand". Also, there are many who are worried that Canada's made in the west' housing boom is heating up, "potentially dangerously so", says Douglas Porter, an economist at BMO Nesbitt Burns investment bank in the Vancouver Sun.

Although interest rates remain "very low", there is the danger that "if prices get divorced from reality", together with an economic slowdown, the boom "could end suddenly".