House prices to fall next year

A “demand-driven downturn” will drive house prices lower by the end of 2011, the association which represents the country’s 100,000 real estate agents said Wednesday.

In an updated market forecast, the Canadian Real Estate Association said the national average resale price will reach a record $325,400 by the end of this year, a gain of 1.6 per cent from current levels.

And while most markets are expected to post “modest” price gains in 2011, lower prices Ontario and British Columbia will drag the national average down by 2.2 per cent.

Its January forecast called for a 1.5-per-cent decline.

“With interest rates soon expected to rise, Canada is widely believed to be entering a typical demand-driven downturn due to recent prices increases and rising interest rates,” said the organization’s chief economist Gregory Klump.
Tougher mortgage qualification rules and the threat of higher interest rates caused many buyers to jump into the market sooner than they may have otherwise, he said, effectively stealing sales from the second half of the year.

“CREA had previously forecasted sales would remain at elevated levels through the first half of 2010 before easing in the second half of the year and over 2011,” the association said in a statement.

“It has been pulled forward, with the fourth quarter of 2009 marking the peak of national activity. This has had the effect of lowering the forecast for national activity over the rest of the year and in 2011.”

CREA expects 490,600 units will be sold this year, a 5.5 per cent jump over 2009 and the second highest level on record. Sales will drop by 8.5 per cent in 2011, however, compared to its previous forecast of 7.1 per cent.

There is no threat of a “U.S.-style housing price correction,” CREA said, because of “Canada’s solid mortgage market trends, conservative lending practices, and prudent borrowing by home buyers.”

The report echoes a recent reports, which have also predicted prices will move lower in the next year. CIBC World Markets economist Benjamin Tal said last week that prices could fall by as much as 10 per cent in the next two years.

TD Bank suggested last month prices could fall by 2.7 per cent in 2011, while Canada Mortgage and Housing Corp. called for higher prices in 2011, with an anticipated gain of 1.3 per cent.

From: Steve Ladurantaye
Globe and Mail Update


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Canadian Real Estate Market in February

As written in the Toronto Sun .

Canada’s real estate market showed no sign of losing steam in February, with housing starts rising faster than expected and a new survey showing 10% of Canadians expect to buy a home in the next two years.

Seasonally adjusted housing starts were 196,700 in the month, up from 185,400 in January, according to figures from the Canadian Mortgage Housing Corp. That was above analysts’ forecasts for a 190,000 gain.

RBC’s 17th annual home ownership study found that the number of Canadians saying they are very likely to buy a new home rose from 7% two years ago to 10%. The number of people who view their house as a good investment rose to a 12-year high of 91%.

Canada’s real estate market has been one of the main drivers of economic growth, with housing construction helping to power a 5% expansion in gross domestic product in the fourth quarter.

Some economists have forecast that the property market will begin to cool from the second half, when the Bank of Canada is expected to begin raising interest rates and demand and supply of available housing becomes more balanced.

“The gain in February housing starts was concentrated in the multiple starts segment, particularly in Toronto,” said Bob Dugan, chief economist at CMHC’s Market Analysis Centre.

Urban multiple starts, or condos, increased by 19.1% to 89,900 units while single urban starts increased by 0.5% to 89,200 units.

Urban starts rose 28.6% in Ontario, 14.3% in Atlantic Canada, 10.8% in the Prairie region and 8% in British Columbia. In Quebec, urban starts dropped 14.1%.

Rural starts were estimated at a seasonally adjusted annual rate of 17,600 units in February.

According to the RBC poll, younger Canadians between the ages of 18 to 24 are likely to lead the market. About 15% said they were likely to buy, almost double the number in 2009.

About 60% also believe housing prices will continue to rise this year, up from just 25% this time a year ago. They also expect mortgage rates to rise, with two-thirds expecting to have to pay more, the bank said.

That belief is being reflected in the choice of mortgage, with 16% opting for a variable rate loan compared with 20% last year.

We would like to thank Ms. Sharon Singleton of The Toronto Sun

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