Although Canada is unlikely to see a property downturn on the same scale as its neighbouring US market it is no longer a seller's market.
'The long-awaited end of the Canadian housing boom has occurred, reflecting more moderate demand and increased supply of properties for sale,' said Toronto-Dominion Bank economists Craig Alexander and Pascal Gauthier said in a new report.
'The year-over-year price growth for existing homes in Canada's major markets fell to only 1.1% in May from 8.6% just four months earlier,' the report says.
The trend has been broadly based, but it has been particularly sharp in some of the markets that had experienced the most dramatic price growth such as Calgary and Edmonton where home prices in April and May fell to below year-earlier levels.
The economists said they had expected the slowdown to occur before now, but housing remained stronger for longer than anticipated largely due to new financing options being offered.
Last month, the Canadian Real Estate Association reported that resale home listings across Canada rose 17.7% in April from a year earlier, a record high.
The bank now forecasts modest national average price growth of 2% this year and 3.5 % in 2009 compared with an annual increase of 10% during the last six years.
However, the Canadian housing market remains fundamentally strong, unlike the US where the latest report from the National Association of Realtors found that median home prices continue to fall.
'The real estate market appears poised for a soft landing rather than a crash. Canada's financial prudence has helped it sidestep the sharp home price declines being experienced in countries including the US, Britain and Spain,' said Sheryl Kennedy, deputy governor of the Bank of Canada.
'Canada's conservative mortgage culture has helped protect it from the excesses seen during the US boom, which had a much larger amount of subprime mortgages,' she added.
