Canada's real estate market will slow down

Canada’s real estate market will slow down

By MoneySense Staff on July 9, 2010
Estimated reading time: 1 minute

Higher interest rates, the introduction of the HST and tightening of mortgage lending rules created a surge of activity in early 2010.

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After a strong first and second quarter, Canada’s real estate market will likely cool off in the last half of 2010, say results from the Royal LePage Market Survey Forecast, which was released earlier today. Prices of homes are expected to decrease in the third and fourth quarters because more homes are being put onto the market for sale. “We have seen an unusual pattern of activity in the housing market over the past 12 months,” Royal LePage CEO Phil Soper says. “This should not be interpreted as a severe correction but rather a natural reaction to the market having peaked quite early this year.” At the end of 2010’s second quarter, the average price of a standard two-storey home rose to $367,835, which is 8.7% higher than the average price at the end of 2009’s second quarter. The average price of a detached bungalow at the end of 2010’s second quarter was $331,868, which is 9% higher than one year prior. Over the same period, standard condominiums rose 7.3% to $230,014. The surge of activity in the first half of 2010 is attributable to various regulatory and financial industry changes, such as the increase in interest rates in the spring, tightening of mortgage lending rules for first time homebuyers and investors, and the leadup to the introduction of the HST in Ontario and B.C. By the end of 2010, Royal LePage forecasts that the appreciation of homes from 2009 to 2010 will average 6.8%. The survey also predicts that the increase of home sales between 2009 and 2010 will increase by just over 1%.