TD releases new housing forecast report
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04/05/2010 10:00:00 AM
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Most of Canada will see solid housing activity but with a slight reduction in prices, a report released today from TD Economics forecasts.
TD expects 475,000 resale units will be sold as 2010 progresses; sales in Q1 were higher than forecasted but the bank interprets the action as an effort by buyers and sellers to pre-empt the highly-publicized regulatory and interest rate changes.
"This is evidenced by the fact that much of the strength emanates from B.C. and Ontario, where the perception is that the upcoming implementation of the harmonized sales tax (HST) in July will raise transaction costs. Nationwide, however, the anticipation of higher interest rates has also played an important role in the currently observable strength in activity," the report said.
An average annual price just shy of $350,000 is also anticipated, a nine per cent increase from last year.
Housing starts were slightly higher than TD expected at 200,000 in 2010's first quarter. Because of stronger supply response, the market balance is expected to be somewhat softer next year favoring potential buyers and resulting in a mild depreciation in home values.
TD previously expected the average home price to rise 1.6 per cent next year but now anticipate a pullback of 2.7 per cent nationally with more than half of the provinces seeing lower prices in 2011.
The bank also predicts interest rates will rise within the context of a strengthening labour market rather than in a vacuum. It also expects the absolute level of borrowing rates will remain affordable, which will keep sales activity from dropping too much.