Existing home sales are expected to fall 11.5 per cent in Canada this year and 4 per cent in 2009, according to a forecast released yesterday by the Canadian Real Estate Association (CREA).
That equates to 460,900 homes changing hands in 2008 compared with a record 520,747 the year before. In 2009, the drop is expected to continue at a more moderate pace, leading to CREA's projected 442,500 in unit sales.
Sales volumes are seen cooling the most in Alberta this year, at a drop of 18.9 per cent, followed by British Columbia and New Brunswick, with projected drops of 14.4 per cent and 11.7 per cent, respectively.
The news came as Statistics Canada reported an unexpected 4.5-per-cent month-over-month drop in building permits in March, led by weakness in Alberta. Residential and non-residential permits fell there, giving it the largest provincial drop at 32.9 per cent.
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This year, sales levels in Saskatchewan and Newfoundland and Labrador are expected to hit records, rising by 7.4 per cent and 6.5 per cent, respectively. Next year, sales activity in Saskatchewan is expected to drop 10 per cent - the biggest pullback, CREA said.
Despite the slowdown in activity, average resale home prices are expected to continue rising at a moderate pace in the next two years, according to the association.
Across Canada, the average price is expected to rise 5.3 per cent in 2008 to $323,500, and 4.2 per cent to $337,000 in 2009. Last year, prices rose 11 per cent to $307,265.
Saskatchewan is expected to have the highest home price appreciation in Canada this year, with the average rising 19.5 per cent to $208,400. It was also last year's hottest market by this measure, with a price jump of 32 per cent.
In 2009, Manitoba is expected to have the greatest price gain at 9.8 per cent, compared with a gain of 12.6 per cent in 2007 and a projected 11-per-cent increase in 2008.
Ontario is expected to have this year's lowest resale home price appreciation, at 4.3 per cent, and Alberta is forecast as next year's slowest growing market by price at an average gain of 2.8 per cent.
"After-tax income growth, strong employment and short-term interest rate cuts will support housing demand, despite further home price increases and increasing economic uncertainty that are wearing on consumer sentiment about making purchases such as a car or home," Gregory Klump, chief economist at CREA, said in a statement.
Meanwhile, the decline in building permits was a surprise as economists had projected a rebound in March. Instead, total permits registered their fourth decrease in five months, with both residential and non-residential sectors declining to $5.6-billion.
"Construction intentions in Canada continued to cool," Statscan said.
For the first quarter of 2008, the total value of permits was down 8.2 per cent compared to the fourth quarter of 2007. It was the third consecutive quarterly contraction, Statscan said.
Most of the weakness stemmed from Alberta. Excluding that province's sharp decline, building permits would have climbed 5.1 per cent nationally, instead of falling 4.5 per cent, Statscan calculated.
Nationally, the value of residential building permits slid 5.7 per cent to $3.6-billion - the second lowest value in 13 months. Permits for both multifamily dwellings and single-family homes fell.
Non-residential permits fell 2.4 per cent from a month earlier, to $2-billion - a level not seen in almost a year. Industrial permits plunged 21.9 per cent, and institutional permits also slid.
Ontario, however, showed some signs of strength. Permits rose 7.3 per cent in March, with multifamily dwellings offsetting decreases in the non-residential sector.
