During the period 1980 through 2009, the Canadian real estate market grew at a compound annual growth rate of 9.7%. The Canadian market has been resilient, with only two significant downturns occurring prior to 2008 – in 1990 and 1995 – both of which returned to pre-downturn levels within 24 months. The duration of these market downturns were 13 months and 14 months, respectively, with decreases of 26% and 21%, respectively. The market declined 18% during the 16-month period February 2008 through May 2009 but then experienced strong year-over-year increases through the second quarter of 2010 when it began to cool off.
Canada’s residential real estate market remained strong throughout the first half of 2010 as economic conditions across the country improved, the stimulus of low interest rates continued to stoke demand, and buyers in Ontario and British Columbia accelerated purchases to beat the HST which was effective July 1, 2010. A number of factors were bringing the market back into balance in the second half of the year, when the rate at which home prices were appreciating was moderating considerably. These factors include the gradual erosion of affordability driven by higher house prices and the expected modest upward movement of interest rates, and an improvement in listings supply as more Canadians felt confident in the economy and were prepared to list their homes and move. The tighter standards for mortgage approvals and other similar measures that were implemented by the federal government in the spring have contributed to moderating demand. We support these modest measures designed to help protect consumers from becoming overleveraged.
The Canadian Real Estate Association (CREA) reduced its forecast in November 2010, noting that housing demand and supply is stabilizing. It forecast that unit sales of MLS-listed housing would decline 4.9% in 2010 and 9% in 2011. As for housing prices, CREA forecast the national average to rise 3.1% in 2010, but decline 1.3% in 2011 reflecting modest average price gains in all provinces but BC, Alberta and Ontario.