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