TORONTO (Reuters) - Canada’s housing market is “in transition” and resale and pricing will cool over the next year in a significant slowing from the boom years in the previous decade, Royal Bank of Canada said.
Robert Hogue, senior economist at Royal Bank, forecast in a report that resales in Canada would rise just 0.9 percent in 2011 to 451,200 homes, and remain unchanged in 2012.
“Flat resales trends would contrast starkly with average annual increases of 6.6 percent in the seven years that preceded the 2008 market downturn and recession,” the report said.
The national average home price is expected to increase by 4.4 percent to C$341,600 ($359,600), and then another 0.4 percent the year after, Hogue predicted.
“Going forward, we’re more likely to see very modest kind of growth in resales following an exceptional period between 2002 to just about 2007, 2008,” said Hogue.
“We’re more likely to see at least over the next couple of years, very flat activity and fairly subdued growth.”
Industry data showed second quarter overall sales fell 4.7 percent from the first quarter, partly because of a rush to buy in the first quarter ahead of tougher mortgage rules implemented in the spring.
Higher mortgage rates in April and May also pushed some homebuyers to the sidelines, while expectations of higher rates to come have also cooled the market.
TD Bank last week said resale activity and prices were poised for a “moderate correction” over the next two years, with prices and resales due to slow because of subdued household income growth and rising interest rates.
Reporting by Ka Yan Ng; editing by Janet Guttsman
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