* Bank says housing will continue to slow, but no crash seen
* Immigration, baby-boomers seen supporting demand
* Long stagnation in prices possible, even as U.S. recovers
By Andrea Hopkins
TORONTO, March 18 A slowdown in Canada's housing
market will continue through 2013 and years of stagnation may
follow, but no crash is likely because demographic trends will
support demand in the medium term, a report by Scotiabank
said on Monday.
The report by Canada's third-largest bank said that home
sales have already dropped more than 10 percent from spring
2012, with prices leveling off but not yet falling except in
particularly hard-hit markets.
Housing, which slowed but did not crash as a result of the
global financial crisis, helped sustain Canada's economy through
much of 2010 to 2012 but is now starting to slide just as the
U.S. housing sector has begun a clear recovery.
Scotiabank said the housing slowdown will trim a quarter of
a percentage point from Canada's economic growth in 2013 and
2014, while the U.S. housing recovery is adding half a
percentage point to annual growth rates there.
While Canadian home sales may continue to slump, the report
said, prices will likely remain above year-ago levels until at
least the second half of 2013, and will not drop as dramatically
as they did in the United States.
Scotiabank senior economist Adrienne Warren said she expects
a decline in prices of around 5 percent but that the drop will
likely play out over the next couple of years rather than happen
She also said demographics, including steady immigration and
the preference of baby boomers to remain in their homes, will
support housing demand.
"Contrary to some dire predictions, population aging will
not fuel a demographically induced sell-off in Canadian real
estate. However, an aging population does point to a lower level
of housing turnover, sales and listings," Warren said in the
report, the bank's annual real estate outlook.
The report said today's seniors are healthier, wealthier and
living longer than previous generations, and attached to their
homes, making them less likely to sell in a down market since
many will not need to tap into their principal residence to
Warren said immigration, which adds some 250,000-300,000
people to Canada's population every year, will increasingly be
the dominant source of new household formation. And while
immigrants typically rent on arrival in Canada, they seek home
ownership after about five years and their rates of
homeownership approach the 70 percent rate of native-born
Canadians after 10 years.
Immigration is most likely to support house prices in big
cities, Warren said. That should help put a floor under the
market in Toronto and Vancouver, which had the hottest markets
prior to the slowdown.
"Relative to their Canadian-born counterparts, immigrant
households are more likely to reside in large and mid-sized
urban centers, which could fuel relatively stronger housing
demand and prices in those areas," Warren said.