Historically low interest rates, stable local economies and increasing affordability should support Canada’s residential real estate market during transitional period.
After experiencing a significant reset in 2008 – a reaction to continuous dire news surrounding the health of the global economy combined with a cooling from the previous years’ fervid activity levels – Canada’s resale real estate market should see only modest price and unit sales corrections take place across the country during 2009. Both national average house prices and the number of homes sold is expected to decline this year, according to the Royal LePage 2009 Market Survey Forecast released today.
Nationally, average house prices are forecast to dip by 3.0 per cent from last year to $295,000, while transactions are projected to fall to 416,000 (–3.5 %) unit sales in 2009. In spite of this cooling trend on a national level, price and activity gains are anticipated in some provinces.
Emotional reaction to recent economic and political instability did much to dampen consumer confidence during the latter part of 2008, causing a marked slowdown in house sales activity. However, as a more rational understanding of the issues gains ground, together with a wide range of announced corrective measures, consumer confidence is anticipated to recover, prompting real estate activity to pick up once again in the latter half of 2009. Further, Canada in 2009 enjoys a stronger economic foundation than most countries and that should temper the housing market correction. The combination of low inflation, reasonable employment levels and improving housing affordability, driven in part by low mortgage rates, are anticipated to stimulate demand in the coming months.
“While Canada’s housing market is anticipated to continue to move through a period of adjustment over the next six months, we should expect modestly lower home prices, not a U.S.-style collapse, which was brought on by a structural failure of the entire American credit system,” said Phil Soper, president and chief executive of Royal LePage Real Estate Services. “Most consumers are not aware that nationally, Canadian housing market activity peaked in 2007 and has been adjusting lower since. We are well into this inevitable cyclical correction.