It's time to reset expectations, Scotiabank says
Canadian home prices will reach a record high this year, but those expecting the degree of home-price inflation seen in the past decade will be disappointed, a Scotiabank real-estate expert said on Tuesday.
"It's time to reset price expectations for the Canadian housing market," said Adrienne Warren, senior economist with Scotiabank. "This was an exceptional decade for pricing."
Looking at the past 50 years, prices on average rose between two per cent and 2.5 per cent annually in each decade. But prices rose an average of 5.2 per cent each year between 2000 and 2009, she said, which led to the current elevated-pricing conditions.
"Some of that reflects a very strong global economy, a commodity boom, unemployment rates falling, all very positive for housing," Warren said.
She added that some lean years in the 1990s meant there was an element of "catching up" going on in the last decade. Average prices increases between 1990 and 2009 was slightly less than two per cent, she said.
As for this year, Warren still anticipates a strong spring sales market as consumers take advantage of rock-bottom interest rates before an expected rate hike by the Bank of Canada in the summer.
Overall, she forecasts 10-per-cent growth in sales volumes to 510,000 transactions for 2010, just shy of record levels in 2007. Average prices will increase about eight per cent to a record $345,000, and housing starts will rise to 190,000 units, she said.
Starting midway through 2010, the market will likely start to slow down, a trend that will carry through to 2011 and beyond, she said.
"Next year we're looking for somewhat lower sales volumes, somewhat lower prices, and lower housing starts," Warren said.