Recession? Might as well be
Garry Marr
Province
Though housing starts declined this year, Canada’s market is in better shape than the U.S.
OTTAWA –We might as well be in a recession because the current economic environment is having the same effect on the housing market, according to the Canadian Real Estate Association.
“Canadian economic growth is being sideswiped by financial-market turmoil, slowing world economic growth and weaker commodity prices,” said Gregory Klump, chief economist with CREA. “The question of whether Canada will avoid a technical recession is moot. Growth will be slow enough that it will feel like a recession.”
The Ottawa-based group updated its housing forecast for 2008 and 2009 and is now calling for B.C. sales to fall by 28.7 per cent this year from 2007 — the largest drop in Canada. Sales in B.C. should then decline another 11.7 per cent next year, it said.
The average B.C. house price will rise 2.7 per cent to $451,100 this year but in 2009 is expected to drop 7.8 per cent — again, the largest drop in Canada — to $416,100.
Nationally, the association expects sales to decline by 12 per cent this year from 2007 and then fall a further three per cent in 2009.
It expects that fewer new listings next year will help stabilize the market, but not enough to stop prices from continuing to fall. The national average sale price is expected to fall by 2.1 per cent in 2009, following a 0.6-per-cent dip this year, with conditions in the housing market not likely to improve until 2010.
“Consumer confidence is being battered by downbeat headline news,” Klump said. “Homebuyer sentiment has become very cautious, by contrast to the urgency to purchase in 2007.
“There are fewer buyers and they are taking longer to shop, so the pricing environment is very competitive. Unrealistically priced homes will sit on the market.”
CREA president Calvin Lindberg said the U.S. market is much different, most notably because the Canadian market does not have the same oversupply of homes.
“Canadians are definitely concerned by the economic news out of the U.S., and much of that news stems from distress in the U.S. housing market,” he said.
But Lindberg added: “Canadians should realize that Canada‘s economy and housing market are in better shape. This means the downturn in consumer confidence will pass and, when it does, housing demand will rebound, especially when they realize the window of opportunity to buy at reduced prices and at low interest rates will begin to narrow once economic growth shows signs of rebounding next year.”