TORONTO - The average price of a house in Canada is likely to decline by three per cent this year as sales activity continues to cool, according to Royal LePage Real Estate Services.
The number of residential resale transactions is forecast to decline 3.5 per cent nationally, though the country's largest realty franchiser expects there will still be local warm spots.
The forecast issued Tuesday follows a "significant reset" in 2008 -- which Royal LePage predicted a year ago would see a 3.5 per cent average increase across the country.
Preliminary numbers show there was actually a 1.1 per cent decline.
Royal LePage says this came as "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, it predicts that "a more rational understanding of the issues," along with government economic measures and low interest rates, will cause activity to pick up in the latter half of 2009.
Overall, the unit of the Brookfield Real Estate Services Fund (TSX:BRE.UN) foresees "only modest price and unit sales corrections" -- not a crash.
Nationally, the average house price is forecast to dip to $295,000, down from $304,000 in 2008, which was off from $307,265 in the peak year of 2007.
"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," stated Royal LePage CEO Phil Soper.
Soper added in an interview that Canadian home prices have been slipping in a "cyclical correction" since early 2008.
"We're well through the process," he said. "Our expectation is that as credit spreads narrow and mortgage rates fall, and as the economy bounces back from a very poor fourth quarter 2008 and first quarter 2009, we'll see continuous improvement."
In spite of the countrywide cooling trend, price and activity gains are still anticipated in some areas, the Royal LePage report added.
Mid-sized cities with prices below the national average, such as Regina and Winnipeg, are expected to see moderate increases.
Meanwhile, the steepest price decline -- nine per cent -- is foreseen for Vancouver, Canada's most expensive city, in "a natural cyclical reaction to an extended period of high price appreciation."
Sharp declines are also expected in "secondary Ontario markets heavily populated by people working in the manufacturing sectors," but Soper said no specific forecasts have been compiled for them.
In major cities, Royal LePage predicts a 2009 price gain of one per cent in Halifax to $234,300, a one per cent decline in Montreal to $254,400, little change in Ottawa at $291,000, a four per cent pullback in Toronto to $364,800, a four per cent gain in Winnipeg to $204,900, a six per cent boost in Regina to $243,300, one per cent slippage in Calgary to $402,000, flat prices in Edmonton at $333,000 and a nine per cent drop in Vancouver to $540,100.
The Calgary Real Estate Board reported separately on Tuesday that the average price of a single-family home in December was $417,398, down four per cent from November and six per cent from December 2007. The number of sales in metropolitan Calgary last month was down 47 per cent from a year earlier at 449, ending what board president Ed Jensen called "a reasonable year."
Nationally, Royal LePage's Soper commented that "while a grey cloud hangs over some markets, the sky is not falling." He predicted that appropriately priced homes will sell for fair value.
On the bright side, Soper noted that most markets will be more welcoming to first-time buyers, and "when real estate markets correct, inventory levels rise, providing buyers choices instead of frustrating bidding wars."
Canada's housing market is quite different from that of the United States, whose collapse "was really a credit-structure failure as much as a correction in housing prices," he said.
"There is no measurable subprime market in Canada, and as a result the forecast impact of foreclosures on house prices and sales activity in Canada is quite negligible."
Asked about the outlook for the real estate profession, he noted that in any industry there are a few people who are notably successful, a majority earning an unspectacular living, and some who are marginal. "I believe the correction of 2008-2009 will take some of the less productive agents out of the market."
