Home sales projected to slip in next 2 years
OTTAWA— The Canadian Real Estate Association cut its sales forecast for this year and next as it reported slower sales for November in the wake of tighter lending rules that came into force in summer. The industry association now expects home sales this year to slip 0.5 per cent compared with 2011, to about 456,300. That compared with a forecast in September that called for sales this year to rise 1.9 per cent to 466,900 units. CREA also said on Monday that it now expects sales next year to drop 2 per cent to 447,400 compared with earlier expectations for a drop of 1.9 per cent to 457,800 in 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.” Finance Minister Jim Flaherty moved in July to tighten mortgage rules for the fourth time in as many years in order to discourage Canadians from taking on too much debt. Among the changes, Flaherty made mortgage payments more expensive by dropping the maximum amortization period to 25 years.
CREA said the average price for 2012 is expected to be $363,900, up 0.3 per cent compared with a September forecast of $365,000, up 0.6 per cent. For 2013, CREA said it expects prices to gain 0.3 per cent to an average $365,100. That compared with earlier expectations of a drop of one-tenth of 1 per cent to $364,500 in 2013.
The downgrade for the outlook for the year came as home sales edged down 1.7 per cent month over month in November and were back where they stood in August. BMO deputy chief economist Doug Porter said for all the attention it has received, the market’s performance has been far from exciting this year. “It increasingly looks like most major markets are indeed undergoing a policy-induced correction,” Porter wrote in a note to clients. “But, for now, the landing looks to be soft in most cities, with the rather obvious exception of Vancouver.”
However, economist David Madani of Capital Economics said the belief that the Canadian market was enjoying a “soft landing” because prices have not fallen sharply was misplaced. “The continued decline in existing home sales support our view that a potentially severe housing correction is underway.”
Sales were down on a year-overyear basis in three of every four local markets in November, including most large urban centres.
Calgary stood out as an exception, with sales up 10.6 per cent from a year ago.