Canadian Housing Market Still Moderating: RBC

What goes up must come down- and this is reflected in a newly released housing forecast from RBC.

Through 2012, in the resale market, they expect prices will increase by 4.4 % this year- and then drop precipitously to 0.4-% growth in 2012. Home resales will increase by 0.9% this year and hold steady through 2012.

Moderation is the order of the day, then.  RBC characterizes this  transition towards moderation as “(having) been punctuated by global events (recession and financial crisis) and policy changes (sharp drop in interest rates, three rounds of mortgage lending rule modifications, and the introduction of the HST in Ontario and British Columbia) that produced tremendous volatility since 2008. Our view is that less turbulent economic and policy environments will support a smoother process going forward. The main policy shift will be one toward progressively higher interest rates, which will cool demand but not deep-freeze it.”

The report looks at regional pricing activity too and suggests that most areas reflected fairly steady, moderate growth, with the exception of “puzzlingly strong gains in the Vancouver market, however, have distorted the national average, thereby exaggerating the headline increase.”

The price anomaly that is Vancouver is expected to partially reverse over the coming months, as affordability becomes a factor.

They expect that demand for housing will be driven by “perfectly off-setting forces.”  Forecasting strong economic growth will increase demand through higher incomes and job growth- and that net-migration will play a part as well.

On the downside, there is an interest rate hike widely anticipated in the coming months. (RBC forecasts a 75 basis point rise by the end of 2011, with more to come in 2012), will moderately stem demand- and the end result will likely be a market firmly trenched in moderation.

Looking at various regions across the country, Alberta is anticipated to lead the way for growth, fuelled by increased demand and reasonable levels of affordability; The Prairies provinces are expected to display a slightly more modest rate of growth; markets in the Atlantic provinces and Ontario are expected to remain fairly flat; on the heels of surge in activity, sales are expected to experience a slight decline in Quebec.  Activity in British Colombia is expected to slow through the end of this year, but because of an extremely strong first part of the year, will still report growth for the year.

The report suggests that, by and large, the country is in a balanced situation: “The recent generally contained pace of property appreciation has reflected a fairly balanced relationship between supply and demand in the majority of markets in the country.”

Friday, 22 July 2011 Newsroom Property Wire Canada