Canada's housing market is a 'surprise' for experts

The Canadian Real Estate Corporation (CREA), which represents 100 boards across the country, admits that the scales have now tipped modestly in favour of 2011 outpacing 2010.

CREA is now predicting 450,800 sales in 2011 which is just under a 1 per cent increase from a year ago. The group had been forecasting a decline of 1 per cent. Sales are expected to drop less than 1 per cent in 2012.

Prices in Vancouver continues to affect the country as they helped pushed CREA’s forecast for the average sale price in 2011 to $363,500, a 7.2 per cent increase from a year ago. This was also an increase from a previous forecast. Next year prices are expected to be flat.

The group noted long-talked-about increases in interest rates have failed to materialize in the market.

“While there had been some talk of potential interest-rate increases, that hasn’t happened,” said Gary Morse, president of CREA. “In fact, rates have actually come down, and are now expected to remain low for the remainder of this year and into 2012.”

Doug Porter, deputy chief economist at Bank of Montreal, said the housing market just seems to keep surprising everybody.

“In a world seemingly awash in negative economic surprises in 2011, one positive surprise has been the resiliency of Canada’s housing market,” said Mr. Porter, adding few analysts were predicting the kind of price increases the market has seen.

“Canadian housing remains surprisingly robust, thanks to still low interest rates and solid job growth. While the recent financial market turmoil may temporarily weigh on activity, sales should ultimately find support from continued exceptionally low borrowing costs.”

Phil Soper, chief executive of Royal LePage Real Estate Services, said his company’s recent forecast was for a 2 per cent decline in sales and a 3 per cent increase in price for 2011. He doesn’t anticipate that changing.

“I think we’re going to start to see it’s not so much the strength of the market but the weakness last year. The market had run out of steam at this point last year,” Mr. Soper said. “I think we are seeing a more normal curve to the market, with the exception of the Vancouver market.”

Source: (in part) Garry Marr, Financial Post

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