3 June 2010
Mortgage changes announced in February are expected to impact activity as well. These changes made some homebuyers finance their home purchases before the new regulations took effect in April.
The Bank of Canada dropped its conditional commitment to keep interest rates low till July. In the end, on June 1st, the Bank raised its overnight lending rate by 25 bps. It also noted it expects the rate growth to slow down.
“Interest rates will probably rise slowly, that’s why home financing will remain affordable for many homebuyers,” said Georges Pahud, CREA President.
Earlier CREA had forecasted sales would remain high through the first half of 2010 before cooling down in the second half of the year and over 2011.
In 2010 national activity is forecast to reach 490,600 units in 2010. It’s 5.5% more than in 2009. Annual activity in Alberta was revised downward because of weaker activity in the first quarter. Ontario is still expected to have a record number of sales in 2010.
Interest rate hike will decrease the national sales activity in 2011. Transactions via the MLS® Systems of Canadian real estate Boards will probably decline for 8.5% and reach the level of 448,700 units in 2011.
All provinces are expected to show small average price gains in 2011 (except British Columbia and Ontario). In these two provinces the activity decline is especially vivid. Average prices are forecast to fall here in the second half of 2010. In the end, the national average price may decline by 2.2% in 2011.
“Canada is widely believed to be entering a typical demand-driven downturn due to recent prices increases and rising interest rates,” said Chief Economist Gregory Klump.
“Canada’s solid mortgage market trends, conservative lending practices can mean that Canada will avoid a U.S.-style housing price correction.”