Royal LePage News Release
CORRECTION, NOT CRASH FOR CANADIAN REAL ESTATE MARKET IN 2009;
AVERAGE HOUSE PRICES FORECAST TO FALL 3.0 PER CENT
Historically
low interest rates, stable local economies and increasing affordability
should support Canada’s residential real estate market during
transitioning period
TORONTO, January 6, 2009 – After experiencing a significant
reset in 2008 – a reaction to continuous dire news surrounding the
health of the global economy combined with a cooling from the previous
years’ fervid activity levels – Canada’s resale real estate market
should see only modest price and unit sales corrections take place
across the country during 2009. Both national average house prices and
the number of homes sold is expected to decline this year, according to
the Royal LePage 2009 Market Survey Forecast released today.
Nationally, average house prices are forecast to dip by 3.0 per cent
from last year to $295,000, while transactions are projected to fall to
416,000 (–3.5 %) unit sales in 2009. In spite of this cooling trend on
a national level, price and activity gains are anticipated in some
provinces.
Emotional reaction to recent economic and political instability did
much to dampen consumer confidence during the latter part of 2008,
causing a marked slowdown in house sales activity. However, as a more
rational understanding of the issues gains ground, together with a wide
range of announced corrective measures, consumer confidence is
anticipated to recover, prompting real estate activity to pick up once
again in the latter half of 2009. Further, Canada in 2009 enjoys a
stronger economic foundation than most countries and that should temper
the housing market correction. The combination of low inflation,
reasonable employment levels and improving housing affordability,
driven in part by low mortgage rates, are anticipated to stimulate
demand in the coming months.
"While Canada's housing market is anticipated to continue to move
through a period of adjustment over the next six months, we should
expect modestly lower home prices, not a U.S.-style collapse, which was
brought on by a structural failure of the entire American credit
system," said Phil Soper, president and chief executive of Royal LePage
Real Estate Services. "Most consumers are not aware that nationally,
Canadian housing market activity peaked in 2007 and has been adjusting
lower since. We are well into this inevitable cyclical correction.”
Added Soper: "While a grey cloud hangs over some markets, the sky is
not falling. In recent years, Canada has been a difficult place to be
a purchaser of real estate, particularly for first-time buyers. When
real estate markets correct, inventory levels rise, providing buyers
choices instead of frustrating bidding wars. In 2009,
appropriately-priced homes will still sell for fair value."
The housing market is expected to perform quite differently from
region to region across the country. In many mid-sized cities where
home prices remain below the national average, such as Regina and
Winnipeg, prices are expected to increase moderately through 2009, as
home ownership remains particularly affordable. The most significant
price decreases are forecast for Canada’s most expensive city,
Vancouver, which has experienced above average price increases for most
of the decade. The correction is a natural cyclical reaction to an
extended period of high price appreciation. Vancouver’s fundamentals,
including growing population figures and the positive economic spinoffs
expected from the 2010 Olympics, remain very positive.
Observed Soper: “For several years, Vancouver experienced aggressive
price run-ups in response to overwhelming levels of demand –
conditions, which eventually reached a tipping point. While buyers
will be acquiring properties for less in 2009, it is important to note
that prices are coming down from all-time record levels.”
Secondary Ontario markets heavily populated by people working in the
manufacturing sectors are also anticipated to experience greater than
average declines in house prices and activity levels in 2009. In
contrast, real estate in Montreal and Ottawa is poised to remain
stable, with average house prices relatively flat through 2009.
After moving through a period of correction that started in 2007,
well before other regions in the country, both Calgary and Edmonton’s
housing markets are anticipated to return to a growth state later in
2009, characterized by stable average house prices and increased unit
sales. Despite slowdowns and delay with some major energy projects,
Alberta’s economy remains one of the strongest in Canada.
Looking east, Halifax’s real estate market is expected to experience
very modest price appreciation through 2009. After experiencing strong
price increases over the last year and a half, the market has hit its
capacity for absorbing rising prices and activity levels. The city’s
diversified array of industries is expected to bolster the economy and
continue to create solid employment opportunities, stabilizing home
values.
Canadians have been confused and justifiably skeptical of the
efforts of the worlds’ central banks and governments to combat the
global economic crisis. There is broad belief, however, that Canada’s
financial house is in better shape than many peer countries,
particularly the U.S. While the federal and most provincial
governments have been slow to implement economic stimulus packages,
they enjoy broad public support in principle. Together with the actions
taken by the Bank of Canada, the positive impact on consumer confidence
stemming from infrastructure spending announcements and other stimulus
programs is expected to be significant.
Concluded Soper: “We believe that the Canadian economy will
struggle early in 2009, but that conditions will progress continually
throughout the year. Improving credit markets, the stimulative impact
from a weaker Canadian dollar, together with the implementation of
large fiscal stimulus initiatives, set the stage for a return to growth
in the second half of 2009.”
Economic Factors Impacting 2009 Forecast
Global Economic Woes
No country is impervious to the current economic woes being felt around
the world. The poor performance of the equity markets and the constant
stream of pessimistic economic news had a very negative impact on
housing activity in Canada in 2008. Consumer confidence is expected to
slowly recover during 2009 as the impact of the many corrective actions
introduced and announced takes root.
Tempered, but continued growth in emerging economies, particularly
China, India and Brazil, should mitigate the downside risk to Canadian
commodity exporters.
Foreclosure Figures in Canada
Foreclosure rates
in Canada are expected to increase, but remain very limited, especially
when compared to the U.S. experience, where a broad structural failure
of the credit system occurred. Canada’s relatively insignificant
subprime market, and in turn, the low number of Canadians contractually
committed to very risky mortgages, should result in a foreclosure rate
of insufficient volume to impact house prices or transaction activity.
Employment Rates
Across the country, employment rates are expected to erode somewhat in
2009, but remain at long-term healthy levels. Some areas in Ontario,
and to a lesser extent Quebec, that have high levels of manufacturing
jobs, may experience greater than national average unemployment. Areas
in Alberta tied to the energy sector may see short-term employment
declines, but the province’s tight overall labour market is expected to
mitigate the downside.
Interest Rates
The Bank of Canada’s overnight target-lending rate, already at very low
levels, is expected to be reduced again early in 2009. This should
bode well for home buyers in 2009 as loosening credit spreads allow
banks to offer more aggressively priced mortgages.
2009 Market Survey Forecast – Average House Prices
|
Market
|
09/08%
|
2009 Forecast
|
2008 Projected
|
2008 / 2007
|
2007
|
2006
|
|
Halifax
|
1.0%
|
$234,300
|
$232,000
|
7.2%
|
$216,339
|
$203,178
|
|
Montreal
|
-1.0%
|
$254,400
|
$257,000
|
4.3%
|
$246,500
|
$215,659
|
|
Ottawa
|
0.0%
|
$291,000
|
$291,000
|
6.6%
|
$273,058
|
$257,481
|
|
Toronto
|
-4.0%
|
$364,800
|
$380,000
|
0.8%
|
$377,029
|
$352,388
|
|
Winnipeg
|
4.0%
|
$204,900
|
$197,000
|
20.5%
|
$163,500
|
$151,983
|
|
Regina
|
6.0%
|
$243,300
|
$229,500
|
38.6%
|
$165,613
|
$131,851
|
|
Calgary
|
-1.0%
|
$402,000
|
$406,000
|
-1.9%
|
$414,066
|
$346,675
|
|
Edmonton
|
0.0%
|
$333,000
|
$333,000
|
-1.7%
|
$338,636
|
$250,915
|
|
Vancouver
|
-9.0%
|
$540,100
|
$593,500
|
4.0%
|
$570,795
|
$509,876
|
|
Canada
|
-3.0%
|
$295,000
|
$304,000
|
-1.1%
|
$307,265
|
$276,974
|
About Royal LePage
Royal LePage is Canada’s leading provider of franchise services to
residential real estate brokerages, with a network of over 14,000
agents and sales representatives in 600 locations across Canada. Royal
LePage is managed by Brookfield Real Estate Services, and is part of a
brand family that includes Royal LePage, Johnston and Daniel, Realty
World and La Capitale. An affiliated company, Brookfield Real Estate
Services Fund, is a TSX listed income trust, trading under the symbol
“BRE.UN."
For more information visit www.royallepage.ca or www.brookfieldres.com.
