The Canadian Real Estate Association (CREA) has updated its forecast for home sales as demand slows and predicts a 2% fall in transactions in 2013 but a 0.3% rise in prices.

When CREA’s last resale housing forecast was published in September, activity showed the first signs of slowing in the wake of new mortgage lending regulations.

It said that demand has remained at lower levels, and this trend is expected to persist in coming months, adding that lower than projected third quarter sales have downgraded the prospects for activity this year in almost every province.

National resale housing activity is now projected to reach 456,300 units in 2012. This represents a 0.5% fall from 458,412 sales in 2011, and stands 0.9% below the 10 year average.

Alberta is still expected to post the biggest annual increase this year of 13.1%, offsetting most of the projected decline in British Columbia of 10.7%.

Sales activity is expected to be less volatile next year than it was in 2012. In 2013, CREA forecasts that national sales activity will recede by 2% to 447,400 units. This is a slightly lower level of activity than previously forecast, reflecting the ongoing impact of new mortgage rules into next year.

The national average home price is projected to rise by 0.3% to $363,900 in 2012, with gains in excess of that in most provinces. The smaller gain in average price nationally as compared to most provinces largely reflects a decline in sales activity among more expensive housing markets compared to 2011, particularly in British Columbia and more recently in Ontario.

The national average price is forecast to edge up another 0.3% to $365,100 in 2013, with British Columbia, Ontario, and New Brunswick registering small price declines and modest average price gains in line with or below inflation in other provinces.

The continuation of moderate economic, job, and income growth will temper the impact of recent mortgage rule changes, which are not expected to dampen activity much more than has already been felt until interest rates are expected to begin rising in late 2013.

‘Annual sales in 2012 reflect a stronger profile prior to recent mortgage rule changes followed by weaker activity following their implementation,’ said Gregory Klump, CREA’s chief economist.

‘By contrast, forecast sales in 2013 reflect an improvement from levels this summer in the immediate wake of mortgage rule changes. Even so, sales in most provinces next year are expected to remain down from levels posted prior to the most recent changes to mortgage regulations,’ he explained.

Despite the small downward revisions to the forecast for national sales in 2012 and 2013, activity is still expected to remain within short reach of the 10 year average.

National sales activity over the first five years of the past decade compared to the most recent five years represent two very different periods. Most of the national average price growth in the 2002to 2007 period was realised amid sustained sellers’ market conditions in most large urban housing markets. Most provincial housing markets are currently balanced, and are expected to remain or return to balanced market territory for 2013.

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