According to the Canadian Real Estate Association’s (CREA) forecast, 2010 and 2011 look like they will be good years for the housing market.
Resale activity will rise 13% in 2010, to hit the record-breaking number of 527,300 units moved. They predict that the first half of the year will see the most strength, due to the low interest rate climate. British Columbia and Ontario will lead the pack.
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However, some of this strength will fade in the second half of the year, particularly as the HST is instituted in British Columbia and Ontario and interest rates grow.
Higher interest rates will also weaken the sales picture in 2011. Sales will fall 7% to hit the levels seen in 2005 and 2006. This is weaker than 2010, but it is much stronger than the trough the market hit in the second half of 2008 and first half of 2009. It is also expected that although interest rates will rise, they will not rise very fast. CREA president Dale Ripplinger says, “Although interest rates are expected to rise, they will still be low enough to keep affordability within reach for many homebuyers requiring mortgage financing, and support overall housing demand.”
With the rebound of sales, the average home price is also expected to rise 5% in 2010. Toronto and Vancouver will continue to lead the upward trend in home prices. There will be some relief in 2011 with prices easing slightly – about 2% – due to the slower activity in BC and Ontario.
Some of this is due to the high-end of the price spectrum in Vancouver and Toronto, which has been driving a lot of the increased activity. Higher income buyers were least affected by the downturn, so they entered the market faster than more middle income buyers.
Chief Economist for the CREA, Gregory Klump, says, “The decline and subsequent rebound in sales activity for homes in the upper price spectrum in some of Canada’s priciest markets skewed average prices upward in the second half of 2009 and into 2010. This segment of housing activity in Ontario and British Columbia is expected to ease beginning in the second half of 2010, causing average prices to moderate in those provinces.”
With interest rates expected to rise at only a moderate rate, the overall well-balanced look of the Canadian housing market is expected to remain in place for the foreseeable future.
Heleen Jacobsen
Broker of Record with InfoMarket Group GMAC Real Estate
www.infomarketgroup.com
