In the first revision of its Annual Resale Housing Forecast in 2011, the Canadian Real Estate Association (CREA) has revised its forecast for home sales activity via the Multiple Listing Service® (MLS®) Systems of Canadian Real Estate Boards and Associations in 2011, and extended it to 2012.
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Citing recent improvements in economic outlook and a further expected improvement in consumer confidence, CREA stated that, “Sales in the second half of 2010 rebounded faster than they had previously expected” according to their February 8, 2011 news release.
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“The hand-off going into 2011, together with the highs and lows for sales activity posted in 2010, provided guidance for CREA’s revised forecast,” said Gregory Klump, CREA Chief Economist.
CREA boosted its sales expectations for the British Columbia residential real estate market by increasing its 2011 BC resale housing forecast by 17% to 72,500 units from it’s previous November 5, 2010 forecast of 61,900 units.
“Home buyers recognize that low mortgage interest rates represent a once in a lifetime opportunity. At the same time, they expect that rates will rise, so they’re doing their homework in order to understand what it could mean in terms of higher mortgage payments down the road before they make an offer,” said Georges Pahud, CREA President.
It also extended its Annual Resale Housing Forecast into 2012 for the first time. In 2012, CREA forecasts that British Columbia residential home sales will increase by 6.8% to 77,400 units from the 2010 level of 74,640 units sold.
This new 2012 forecast of 77,400 units also represents a 2.95% increase over CREA’s current 2011 forecast of 72,500 units.
| (CREA) British Columbia – Resale Housing Forecast | 2009 | 2010 | 2010 (F) | 2011 (F) | 2012 (F) |
| Resale Housing Forecast – Feb 8, 2010 | 85,028 | 74,650 | 101,900 | 88,800 | N/A |
| Resale Housing Forecast – June 2, 2010 | 85,028 | 74,650 | 80,000 | 71,500 | N/A |
| Resale Housing Forecast – July 30, 2010 | 85,028 | 74,650 | 77,600 | 68,900 | N/A |
| Resale Housing Forecast – Nov 5, 2010 | 85,028 | 74,650 | 72,700 | 61,900 | N/A |
| Resale Housing Forecast – Feb 8, 2011 | 85,028 | 74,650 | N/A | 72,500 | 77,400 |
The introduction of a new 12% HST tax in British Columbia on July 1, 2010 was one of three issues that CREA identified as “transitory factors” that caused volatility in the sales activity of BC’s real estate market last year. The other two were, changes to Canadian mortgage regulations that were implemented on April 19, 2010 and a June 1, 2010 quarter point interest rate hike by the Bank of Canada, which surprised most Canadians because of the BOC’s conditional commitment to keep interest rates on hold until the second half of 2010.
In 2011, British Columbian’s are yet again facing the prospect of new Canadian mortgage rules to be introduced on March 18, 2011 and April 18, 2011.
Get more info on the New 2011 Canadian Mortgage Rules by clicking here.
“Recent additional changes to mortgage regulations will further ensure that buyers don’t buy more home than they can afford when interest rates inevitably rise,” said Klump.
“The announcement of the new changes to mortgage regulations will likely bring forward some sales into the first quarter that would have otherwise occurred later in the year, particularly in some of Canada’s more expensive housing markets. This is expected to produce a milder version of the volatility in sales activity that we saw last year which resulted from additional transitory factors,” added Klump.
CREA expects that continued economic recovery will result in job and income growth that will spur consumer confidence further throughout 2011 after dipping in the second quarter due to the new mortgage regulations.
While CREA did acknowledge that Canadian interest rates are expected to rise in 2011, they do not see this as a significant factor for the housing market.
Get more info on the Bank of Canada Quarterly Interest Rate Forecast for 2011 by clicking here.
“Even though mortgage interest rates are expected to rise later this year, they will still be within short reach of current levels and remain supportive for housing market activity. Strengthening economic fundamentals will keep the housing market in balance, which will keep home prices stable,” said Klump.
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