The Canadian Real Estate Association has revised its forecast for home sales upward for 2011, citing stronger-than-expected sales and prices in the second quarter and good momentum entering the second half of the year.
But economists warn Canadians should expect a gradual slowdown in the housing market to begin next year, as sales in Toronto and Vancouver cool and interest rate hikes eventually kick in.
The association also revised its estimate for 2012 sales to fall seven tenths of a percentage point to 447,000 housing units.
“Less favourable economic fundamentals, combined with new mortgage rules in place, are beginning to clip the wings of the Canadian housing market activity,” TD economist Sonya Gulati wrote in a note.
Average home prices are expected to moderate in the second half of the year following an unusually high surge of expensive Vancouver home sales.
Sales in July stayed flat in Toronto and fell slightly in Vancouver, according to CREA, and national housing prices were at their lowest level since January 2011 last month, at $361,181.
“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,” Ms. Gulati wrote.
CREA said Tuesday it expects activity will increase by less than one per cent this year compared with 2010, up slightly from its previous forecast of a one per cent decline in sales. National sales are expected to reach 450,800 homes in 2011, the association said, and average sales prices will be 7.2 per cent higher than the previous year.
“While there had been some talk of potential interest rate increases, that hasn’t happened,” Gary Morse, the association’s president, wrote in a statement. “In fact, rates have actually come down, and are now expected to remain low for the remainder of this year and into 2012. It’s a great opportunity to purchase a property with financing at very favourable rates.”