Over the last three months, a number of people and agencies have been making predictions about where property prices will head in Canada during 2009.

Royal LePage, a large estate agency predicts “correction, not crash for Canadian real estate”. They forecast the Canadian market will fall by just three percent. The market will be dragged down by falls of nine percent in British Columbia and four percent in Ontario. They predict very small declines or small price rises in other provinces.

Canada Mortgage and Housing Corporation believe the market is due for a 5.2 percent fall during the year. Bob Dugan, CMHC Chief Economist says, “The economic downturn will result in a decrease in demand for home ownership leading to a decline in housing starts and existing home sales in 2009. Housing market activity will begin to strengthen as the Canadian economy rebounds in 2010 and the level of housing starts over the forecast period will be more in line with demographic fundamentals.”

The Canadian Real Estate Association forecasts a decline of eight percent in 2009. CREA’s Chief Economist Gregory Klump comments, “The national housing market is recalibrating due to weak sales activity. Supply will take time to adjust to lower demand, but sellers unwilling to accept offers below their expectations will remove their home from the market. Fewer active listings reduces buyer choice, and in time puts a floor under prices.”

CIBC World Markets economist Benjamin Tal predicts a ten percent fall, with the biggest price falls in Western Canada, where they rose most during the housing boom. “The decline is going to be significant, but it’s not going to be a freefall,” Tal said. “The U.S., minus subprime, equals Canada.”

Bank of Nova Scotia senior economist Adrienne Warren also predicts prices will fall by ten percent. Ms. Warren says Vancouver, Sudbury and Calgary could see an even worse decline than the national average this year, because those cities have the greatest imbalance between supply and demand.

Pascal Gauthier, a TD Bank economist is most pessimistic, predicting an eleven percent fall. “We have people testing the market [by selling] but we are still not looking at desperate sellers,” he says.

So, there is a consensus. Overall home prices will fall in Canada during 2009. Taking a crude average of these five forecast gives a collective prediction of an eight percent fall in Canada’s home prices during the year. The price falls predicted by estate agencies are at the lower end of the forecasts and those from economists are at the higher end.

Courtesy of Canada House Price Predictions for 2009.

20 Mar 2009

Home sales in Canada were down 31 percent in February compared with a year ago, and average prices fell 9.2 percent says the Canadian Real Estate Association.

The supply of homes for sale remains high, but has been trending lower with the number of homes on the market down 10.9 per cent from February last year.

“Consumer confidence will continue to be depressed by a barrage of negative economic news in the months ahead,” said CREA Chief Economist Gregory Klump. “Heightened job insecurity will keep many potential homebuyers on the sidelines. Those who are confident about their job situation will benefit from improving affordability in a number of housing markets.”

With falling interest rates (The Bank of Canada lowered its headline interest rate to a record low 0.50 percent at the beginning of March) and falling house prices, the affordability of houses in Canada has improved sharply over the past few months. The Bank said, “the effects of the recent aggressive monetary and fiscal policy actions in Canada and other major economies will begin to be felt in the second half of this year and will build through 2010. Once the global financial system stabilizes and global growth recovers, the underlying strength of the Canadian economy and financial sector should ensure a more rapid recovery in Canada than in most other industrialized economies.”

The ongoing credit crunch has pushed Canada’s banks into reducing or completely eliminating discounts on advertised mortgage interest rates.

“Sales activity and prices will decline this year, as many buyers hunker down and put off buying decisions during the economic recession,” said Klump.

16 Mar 2009

Canadian employment fell for the fourth consecutive month in February, bringing total job losses since the peak of last October to 295,000. The unemployment rate pushed up 0.5 percentage points to 7.7%.

All of the employment losses in February were in full-time work, while part-time employment edged up only slightly. This continues the downward trend in full-time employment observed since October. Part-time employment has shown only a small increase over the same period.

Sharp decline in construction employment

In February, employment decreased by 43,000 in construction, the second large decline in three months. While the construction industry had the fastest growth from January to October 2008, it has since experienced the steepest decline. The downward trend coincides with the recent weakness in building permits and housing starts.

Employment in February also fell in professional, scientific & technical services, mostly in legal services and in architecture, engineering and design services. Employment edged down in educational services as well.

Employment in natural resources also declined in February, all in mining, oil and gas extraction, with most of the decrease observed in Alberta.

In February, employment rose by 25,000 in manufacturing, with the largest gain in food products manufacturing. Transportation equipment manufacturing was little changed following declines the month before. Despite the overall increase in February, manufacturing employment is down 5.3% from 12 months earlier.

The number of workers employed in agriculture as their main job increased in February. However, over the last 12 months, employment in this industry is down -3.7%.

Employment losses in February were almost equally split among private sector employees, public sector employees and the self-employed.

Ontario
Employment in Ontario fell by 35,000 in February, mostly in construction and finance, insurance, real estate and leasing. This pushed the unemployment rate up 0.7 percentage points to 8.7%, the highest since April 1997. Since last October, the province’s unemployment rate has risen by 2.0 percentage points, with increases concentrated in southwestern Ontario.

Since last October, just over half of Canada’s employment losses have occurred in Ontario, far above the province’s 39% share of the total working-age population. Employment in the province fell by 160,000 during this period, with the largest decreases in manufacturing; business, building and other support services; and construction.

Quebec
In Quebec, employment declined by 18,000 in February, while the unemployment rate edged up 0.2 percentage points to 7.9%. The unemployment rate in Quebec has risen by 0.7 percentage points since last October.

Alberta
Employment fell by 24,000 in Alberta in February, the second notable decline in three months. February’s drop in employment pushed the unemployment rate for the province up by a full percentage point to 5.4%, the highest in almost six years. Since last October, losses have been mostly in construction and manufacturing.

Figures from Statistics Canada

13 Mar 2009