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CA property sales expected to slow this year and next, says CREA

Sean Wang - Tuesday, September 18, 2012

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The Canadian Real Estate Association (CREA) has updated its forecast for home sales and is predicting fewer home sales this year and next. The national average price forecast has also been reduced, reflecting an expected decrease in Ontario’s and British Columbia’s provincial sales as a proportion of national activity. British Columbia’s share of national sales has declined further below its long term average. Ontario’s share of national sales has also retreated from elevated levels, and is expected to hold near its long run average.

National resale housing activity is now forecast to rise by 1.9% to 466,900 units in 2012. Alberta is still expected to post the biggest increase in activity, offsetting a sales decline in British Columbia. In 2013, CREA forecasts that national sales activity will recede by 1.9% to 457,800 units. This is a larger decline than was previously forecast, reflecting the cumulative effects of previous and recent changes to mortgage regulations, and anticipated interest rate increases in the second half of 2013. Activity is expected to ease in all provinces except Alberta and Manitoba, with Ontario registering the largest decline. Although revised downward, national sales in 2012 and 2013 are forecast to remain roughly on par with the 10 year average, with 2012 coming in slightly above and 2013 slightly below average.

The national average home price is forecast to rise by just 0.6% to $365,000 in 2012, reflecting a strong start to the year for sales and average price in Ontario but fewer expensive home sales in British Columbia. The national average price is expected to edge lower by one tenth of 1% to $364,500 in 2013, with Ontario and British Columbia registering small price declines amid modest average price gains in other provinces. ‘Recent changes to mortgage regulations are likely to sideline some potential first- time home buyers, particularly in some of Canada’s priciest housing markets,’ said Gregory Klump, CREA’s chief economist. ‘That’s likely to result in slower momentum for resale housing activity, with an increase in the amount of time it takes for move-up buyers to sell their current home. Job growth is widely expected to continue at a modest pace while interest rates remain on hold, so the economic outlook is absent the factors that typically result in forced sales and a dramatic swing in prices,’ he added.

Its latest index shows that residential property sales fell 5.8% between July and August, the largest monthly decline since June 2011. Declines were reported in about two thirds of all local markets representing 80% of national activity, with monthly sales declines in almost all large urban centres, including Greater Toronto, Greater Montreal, Greater Vancouver, the Fraser Valley, Calgary, Edmonton, and Ottawa. Actual, not seasonally adjusted, activity was down 8.9% in August 2012 compared to the same month last year, the biggest year on year drop since April 2011.

The actual, not seasonally adjusted, national average price for homes sold in August 2012 was $350,192, up three tenths of 1% from the same month last year. Year on year price growth held steady at 5.6% in August for one storey single family homes and was 5.2% for two storey single family homes. Prices for townhouse and apartment units continue to see more modest gains, rising 1.7% and 1.8% respectively year on year, smaller gains than were seen in July.