Canadians Choosing to Live in Urban Cores – Report

High density neighbourhood in Downtown Vancouver. A new report says Canadians are choosing the shorter commute times and proximity to work offered by residences in city cores over larger houses in the suburbs (photo credit: Guilhem Vellut from Vancouver, Canada)

Canadians are increasingly preferring downtown living over life in suburbia, according to a new report on Canada’s real estate market.

Issued jointly by PricewaterhouseCoopers and the Urban Land Institute (ULI), the annual report aims to track trends in the country’s real estate market, and has identified the growing preference for urban living as a major shift that will shape Canadian cities.

The emerging trend toward living in the urban core is accompanying greater construction of high density mixed-use development which can include residential, retail, office and hotel units under one roof.

The report cites a declining tolerance for long commutes among Canadians, as well as municipal policy to encourage intensification in city cores over an expansion of their suburbs, as the major forces behind the growing trend.

It warns that the reverse migration to city cores could spell trouble for commercial real estate in the suburbs. An expansion by American firms in Canada, amid a strengthening U.S. economy, could counteract this drop in demand for suburban office space, the report says.

Inflation Drops to 1.2% in May, Reducing Likelihood of Rate Hike

The decline in inflation in May is bullish for short-term housing prices. Housing prices in Canada's major cities have increased significantly over the last five years, which anecdotal evidence suggests is partly due to greater investment in the market by foreign and immigrant investors.

Prices increased 1.2 percent in the 12 months leading up to May, a drop of 0.8 percent from the annual inflation rate in April, according to a report released by Statistics Canada today, a development that could keep interest rates low and help shore up housing prices in the near term.

The slowdown in inflation was due primarily to declines in natural gas and oil prices, smaller price increases for passenger vehicles, and a small decline in women’s clothing prices.

The inflation news could help boost short term housing prices, or forestall what some see as a coming correction in housing prices that are at bubble levels, as it reduces the likelihood that the Bank of Canada will increase interest rates.

The likely repercussions for the housing market are tempered by Finance Minister Jim Flaherty’s announcement yesterday that the federal government would tighten mortgage rules to reduce what his department sees as housing demand driven by speculation and funded by too much borrowing.

He said that the Canada Mortgage and Housing Corporation (CMHC), a government owned home mortgage guaranteer that insures 49 percent of Canadian home mortgages, would reduce the maximum term of mortgages it will insure from 30 years to 25 years and no longer insure mortgages for homes worth more than $1 million.