The average price of a Canadian home is expected to decline by 8 per cent this year before rising by about 1 per cent in 2010, says a forecast by the Canadian Real Estate Association.
"We are caught in a cycle where consumer confidence has been eroded by job losses, and consumer confidence is an essential ingredient for housing sales activity," CREA president Calvin Lindberg said in a report released yesterday.
The average Canadian home price was $303,594 at the end of 2008, but that should drop to $279,400 by the end of this year before rebounding slightly next year, according to the association that represents realtors in Canada.
Ontario should see prices fall to an average of $279,100, down from $302,354, while British Columbia will see the biggest hit to prices with a fall of 10.9 per cent, followed by Alberta at 8.9 per cent. Newfoundland is predicted to buck the trend, with prices rising by 4.8 per cent this year.
Sales activity is also forecast to fall by 16.9 per cent this year, but realtors are predicting a rebound of 9.9 per cent in 2010, marked by a second-half acceleration based on a recovering economy.
While the forecast is optimistic compared with those of some analysts – who believe the housing market may not recover for several years given the last housing downturn, which saw average prices fall for seven straight years in the Toronto area – the report is in line with other economists who predict the housing market will start to show signs of recovery next year.
"The correction in Canada's housing market continues to unfold and it appears the pace is a bit quicker than we had originally anticipated," Charmaine Buskas, senior economics strategist with TD Securities, said in a note yesterday. "In the face of continued economic weakness, housing may not see a rebound until early 2010."
Canadian housing starts fell 10.9 per cent in January to 153,500 annualized units, the fifth consecutive monthly decline, resulting in the slowest pace of residential construction activity since 2001, according to a separate report by the Canada Mortgage and Housing Corp. yesterday.
"The Canadian housing correction is in full swing, having a wide impact across the country," BMO Capital Markets economist Robert Kavcic said in a note. "With sales activity showing no signs of life, residential construction will be under pressure for most of 2009."
The Toronto Real Estate Board reported 2,670 sales in January compared with 5,075 at the same time last year, a drop of 47 per cent.
The average price was $343,632 – more than $30,000 less than the same time last year.
Meanwhile, a report by Toronto-based Altus Group reiterates fears over the burgeoning condo inventory in the Greater Toronto Area.
According to the housing research firm, 94 new projects were launched in the GTA in 2008, with 55 per cent of units remaining unsold by year's end.
Altus forecasts project cancellations will be more frequent this year as "many projects in the pre-construction stage are far from achieving a sufficient per cent of units sold to obtain financing."
The report says the situation may be less dire than during the housing bubble of the '80s because mortgage rates and investor activity were much higher then.
