Globe and Mail Update PublishedTuesday, Aug. 16, 2011 7:31AM EDT Last updatedTuesday, Aug. 16, 2011 12:40PM EDT
CREA boosts forecasts, but markets to tame
Canada's real estate industry has slighty boosted its 2011 forecast for sales and prices given a better-than-expected second quarter. But expect things to slow down a bit going forward.
The Canadian Real Estate Association now expects housing sales of 450,800 this year, up by less than 1 per cent from 2010 but better than the slight decline it had originally forecast. However, it added in a statement today that "erosion in affordability due to higher prices has prompted a small downward revision to the outlook for sales in 2012."
CREA said it expects the national average home price to climb 7.2 per cent this year to $363,500, largely because of the action in Vancouver and Toronto.
"The national average home price is expected to moderate in the second half of 2011, returning to normal following a heavily skewed start to the year."
On a monthly basis, CREA reported today that sales dipped in July by 0.1 per cent from June, while prices dipped 0.3 per cent and listings rose 0.9 per cent.
"While national sales have been edging lower on a trend basis since the beginning of the year, resale prices seem to have leapt on the bandwagon," said Toronto-Dominion Bank economist Sonya Gulati.
"This is not surprising given the two- to three-quarter lag often seen between resale activity movements and changes in resale home prices," she said in a research note.
"Less favourable economic fundamentals, combined with new mortgage rules in place, are beginning to clip the wings of the Canadian housing market activity. With uncertainty permeating markets regarding the state of the global economic recovery, we continue to expect that real estate activity with temper over the next 18-24 months."
Noting that the Bank of Canada isn't expected to hike interest rates by much any time soon, Ms. Gulati said low borrowing costs will support the industry. But that only pushes back an expected "adjustment" in the market.
"With their recent build-up in housing activity and prices, Toronto and Vancouver are thought to be particularly vulnerable relative to other major markets," she added.
"In July, we saw sales and prices stay flat or retreat in both of these two urban centres. Going forward, a correction is ripe for these cities in order to bring both markets in line with balanced territory. However, we expect such a retreat in prices and sales to be gradual in nature taking place over several quarters, with the brunt occurring in late 2012 into early 2013."