Property prices and sales expected to fall in Canada in 2011

And it expects the number of sales to fall as economic prospects but a damper on demand despite interest rates being low. It says activity could fall by 9% next year.
 
‘Housing demand and supply is stabilizing. That’s good news for home buyers, who will feel less hurried to make an offer than they did when transitory factors ignited housing demand in early 2010. It’s also good news for home sellers, who will feel more confident about price stability now that the housing market has become balanced,’ said CREA chief economist Gregory Klump.
 
‘Interest rates are widely expected to remain low for some time due to recent downward revisions by the Bank of Canada to its outlooks for economic growth and inflation. But consumer sentiment will likely remain under pressure until economic prospects improve meaningfully,’ he added.
 
CREA, which represents 96,000 real estate agents across the country, said that sales in the three months ending in September were weaker than expected due to ‘lacklustre economic and job growth and muted consumer confidence’.
 
Sales activity in the third quarter of 2010 began on a weak footing, but gained traction as the quarter progressed. Improving momentum for home sales activity suggests the resale housing market is stabilizing, but weaker than expected third quarter activity has reduced CREA’s annual forecast.
 
National sales activity is now expected to reach 442,200 units in 2010, representing an annual decline of 4.9%. While monthly levels for sales activity are stabilizing, year on year comparisons are likely to remain stretched well into 2011 due to the record level activity reported in late 2009 and early 2010.
 
For 2011, it is forecasting slight average price gains in all provinces except British Columbia, Alberta and Ontario. Lower sales activity in British Columbia and Ontario is expected to result in a 1.3% decline in the national average price to $326,000, it said.  
 
‘Many households will be focused on paying down their debts before the Bank of Canada resumes hiking interest rates next year. Economic uncertainty is likely to keep potential homebuyers in a cautious mood, so the continuation of low and stable interest rates is unlikely to cause housing demand or prices to swell,’ Klump explained.
 
Interest rates will play a key role moving forward, according to CREA president Georges Pahud. ‘Interest rates are expected to resume their return to more normal levels next year, but will still be at levels that are friendly to the housing market,’ he said.