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Simeon Mitropolitski is a Canadian analyst, of Bulgarian origin, and a former syndicated columnist with the Bulgarian News Agency (BTA). He is the author of several hundred articles dealing with hot political and economic topics, both national and international.

He was part of the first group of Bulgarian intellectuals and students that began the opposition movement that finally put an end to the communist regime in this country in 1989, and in 1996-1997 participated in international observation teams during the elections in several Balkan countries - Romania, Albania and Bulgaria.

In 2002 Simeon and his family moved from Bulgaria to Canada where they live now in Montreal, province of Quebec. Simeon is a Master of Political Science from McGill University and a B.A. of Political Science and History.

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Is Canadian real estate market going to another burst like that experienced in the early and middle 90s in Toronto and Vancouver? Or we are witnessing a healthy boom that will continue during the years ahead? So far there isn't a widespread consent on that point among the experts though there are signs that the actual trends are neither a healthy boom nor a factor leading to a market burst.

The market statistics during the recent months are very interesting. They suggest that the market is bouncing up after years of hesitant development but on the other hand they also suggest that this hyperactivity may come to an end sooner than we can expect. The factors, which explain the higher than the average activity on the market are still the lower interest rates*, the low levels of inflation, strong economic bases and the massive influx of new buyers via the immigration and upscale social promotion.

What we have on the other side of the equilibrium? First, we have increasing house prices that tend to counterweigh the lower interest rates. In the country in general the prices have gone up by almost 6% in the last 12 months and in some areas like Toronto and Montreal by 10%. Second, the affordability is gradually deteriorating and is expected to pass over 33% of the household incomes by the end of 2002**. Third, the mortgage rates will be increased following the main interest hikes expected to occur in the next months.

All these market factors are expected to contribute to a slow decrease of the new housing starts from 200,000 on annual basis at the beginning of the year to 160,000 by the end of 2002.

This is the most realistic scenario for the real estate market development in Canada for the rest of this year given the present economic factors. There are though at least two more scenarios that may become dominant depending on the US economy factor. It can change substantially in the months ahead bringing also changes to the macro-economic framework of Canada. The US economy may return to the situation of neither crisis nor expansion that dominated in the months just before and after 9/11. In this case the Canadian economy may be made fragile and the actual boom in the residential real estate sector that fuels the economic activity may be short-lived.

In the next scenario the US economy will regain its strength from the late 90s that will further accelerate the economic activity in Canada. In this case the real estate boom could continue even after the end of 2002.

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* - Five-year mortgage rates averaged 7% in the first quarter of 2002.

** - It's still far away from 45-50% 10 years ago, but it's already 3% higher than at the end of 2001. The affordability now is varying from 26% in Atlantic Provinces to almost 40% in British Columbia.

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