Housing market key to growth
By Peter Diekmeyer • Bankrate.com

"Housing-related spending accounts for more than 20 per cent of Canada's gross domestic product, contributing about $330 billion for the Canadian economy in 2010, up 7.1 per cent from $308 billion in 2009," notes the agency. "Urban core housing need improved between 2002 and 2008, as 87 per cent of urban Canadian households either had, or could afford, acceptable housing in 2008."

The report also notes the growing influence of seniors (whose share of the population will rise from about 14 per cent to almost 28 per cent by 2036) on the housing market, the importance of low interest rates on driving house prices upwards and the growing popularity of condominiums.

Continued strength
That contribution was particularly prominent in December as housing starts rose to a seasonally-adjusted annual rate of 200,200 units during the month, up from 185,600 units in November. That's far above the 175,000 new units that economists figure that the country needs to build each year to keep up with demographic demand.

The existing homes market also continued to hold up, according to the Canadian Real Estate Association (CREA), with actual average selling prices increasing in December to $347,801, up 0.9 per cent compared to December of 2011.

Of course the continued, though slightly waning, strength from Canada's housing sector raises interesting questions as to how long the good luck can hold out. For example, according to the CMHC, 68 per cent of Canadians now own their own homes, a high level from a historical standpoint. (In the U.S., home ownership as a percentage of the population peaked at just over 69 per cent in 2004, but has fallen significantly since then.)

Furthermore, as CREA notes, comparative average selling prices for the first quarter of this year are unlikely to shine, due to the fact that prices spiked during the corresponding quarter in 2011 due to positive momentum in the upper end of the market. The question now is how those prices will hold out in the rest of the year.

The good news is that interest rates, one of the key drivers of real estate demand, look set to remain low for some time. The Bank of Canada maintained its policy rate at 1 per cent this week, and its communiqué gave no indication that any change is coming.

Peter Diekmeyer is Bankrate.ca's economics columnist.