Real estate's recovery to come in 2010

While the Canadian housing market has put the past year's recession and market crisis behind, other real-estate segments are still struggling to get back on track, according to a report released Wednesday.

The overall Canadian real-estate market has seen property values down between 10 and 20 per cent from their peaks; and a slow recovery should take hold late next year, according to a joint report by Pricewaterhouse

Coopers and the Urban Land Institute.

The report rated cities such as Vancouver, Ottawa and Toronto as some of the better spots to invest in real estate, with Halifax and Calgary the weakest among major markets.

Such an assessment is somewhat sombre in comparison with trends in the housing market, where the latest report from the Canadian Real Estate Association shows both sales levels and prices back in record territory.

Frank Magliocco, leader of PwC's Canadian real-estate practice, said the difference between residential real estate and everything else comes down to one of the first rules of economics -- supply and demand. "I think when you look at the inventory levels of homes, we don't have a big issue there," he said.

"We're a lot closer to, what I'd say, equilibrium in terms of supply and demand [in the residential market]."

There is a greater amount of excess capacity in other segments, such as in facilities used for manufacturing purposes, he said.

Magliocco added that some homebuyers in Ontario and B.C. might be trying to purchase before these provinces implement harmonized sales taxes next July, adding new costs to buying a home.

Magliocco said much of what will happen in Canada's real-estate market depends on how successful the U.S. is in its economic recovery, given how closely the two North American economies are intertwined.

While Canadian properties were not as severely affected as other places, namely the U.S., the PwC/ULI report says better investment opportunities might exist outside Canada. "If someone surmises that [the U.S.] may be at the bottom now, as they correct, there may be a better uptick," said Magliocco.

(prepared by Derek Abma/Financial Post/Vancouver Province)