Housing market will cool down, real estate industry says

Posted: February 18, 2010 in 1
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February 17, 2010

The Canadian Press

OTTAWA — House price increases will moderate as the resale market becomes more balanced, says the president of the Canadian Real Estate Association.
“The resale housing market is becoming more balanced in a number of provinces,” Dale Ripplinger said Wednesday after the association released January sales statistics that revealed another big year-over-year price increase.
“A more balanced market is likely to result in smaller price increases going forward, with buyers in less of a rush due to an increase in supply.
”While Canadian home resale volumes slipped in January compared with December, they came in far higher than in January 2009, when sales fell to the lowest levels in a decade as the country suffered through the global credit crunch and recession.
The association said 25,671 homes were sold across the country in January, up 58 per cent from the same month a year earlier when consumer confidence hit an ebb, drying up buying and lending activity.
The national average price for homes listed on the association’s Multiple Listing Service was $328,537, up 19.6 per cent from a year ago.
The Kitchener-Waterloo Real Estate Board recorded 416 sales in January, 64 per cent more than a year ago. The Real Estate Board of Cambridge registered 140 sales, an increase of 32 per cent.
The average price in Kitchener rose 12.3 per cent to $278,825 on a year-over-year basis. In Cambridge, the average price jumped 16.3 per cent to $278,527.
The association’s report was issued a day after Finance Minister Jim Flaherty announced that tighter rules for mortgage borrowers will be introduced in April. He described it as a measure to prevent a bubble in the housing market.
Under the new rules, effective April 19, borrowers will have to meet the standards for a five-year fixed-rate mortgage even if the interest they will pay initially is lower.
Compared month-over-month, seasonally adjusted home sales were down 2.8 per cent from the strong levels reported in December, giving a sign that the housing market could be already starting to cool in some regions.
Nearly half of the drop was linked to a slowdown in housing sales in Ontario.
“One car doesn’t make a parade, so a few more months of results showing a cooling trend will be required before talk of a Canadian housing bubble begins to fade,” said association chief economist Gregory Klump.
Klump suggested that Flaherty’s new plan and the harmonized sales tax, which replaces provincial sales taxes in Ontario and British Columbia on July 1, could encourage more Canadians to enter the market in the first half of the year.
“It could take until the second half of the year before a cooling trend becomes evident,” he said.
Resale homes were still drawing a stronger demand for January, with 170,199 listed homes on the Multiple Listing Service in Canada, a decline of 18 per cent over the same time last year, the report said.

With files from Record staf

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