In August, the Canadian Real Estate Association forecast a 2.6 per cent increase in national housing prices for 2008 and another 2.1 per cent next year. Yesterday, CREA released a new forecast, calling for a 0.6 per cent slide this year and a further 2.1 per cent drop in 2009.
"This is in line with the downward revisions of the Canadian economic and job growth forecasts," CREA chief economist Gregory Klump said yesterday. A bigger-than-expected price depreciation and lower sales in British Columbia are expected to pull down the national average, Klump added.
The downgrade comes on the heels of another revision by Canada Mortgage and Housing Corp. last week.
The federal housing agency said Ontario housing starts were originally forecast to hit 65,000 units next year, but revised that down to 62,000. Existing home sales, forecast to be 178,000 in 2009, were downgraded to 173,000.
"With a weak domestic economy and tighter lending conditions, we expect Canadian housing activity to slow notably further in the future," said Millan Mulraine, an economics strategist with TD Securities.
Meanwhile, in a separate release yesterday, the CMHC said Canadian residential construction declined by 3.1 per cent in October compared with a month earlier.
Starts came in at 211,800 annualized units, greater than the expected 200,000 units, thanks to remaining strength in the condominium sector.
"The strongest level of condominium apartment construction on record has resulted in a substantial jump in total new home construction this year," said Jason Mercer, senior market analyst for the federal housing authority.
This is particularly true in the Toronto area, where year-to-date starts are up by almost a third compared with the same time last year.
Starts are a lagging indicator. Most of the starts today are from sales of condos that occurred a year or two ago, and that trend isn't expected to continue as strongly in the future. "New home and condo sales have slowed in the last couple of months from the record highs of the past couple of years," said Ontario Home Builders' president Frank Giannone. Last week, the Toronto Real Estate Board reported a 35 per cent decline in year-over-year sales in October.
The average price of an existing home in Toronto is now $376,896, down 13 per cent from last October's average of $434,022. The impact was more muted in the 905 suburbs, where the average price of a home is down by 8 per cent to $336,049.
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