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May 6, 2010 - House prices to cool in 2011, says TD
Financial Post
OTTAWA -- The latest housing forecast from
TD Economics leaves 2010 totals for sales and prices in Canada largely the same
as its previous expectations in December, though that masks a wider discrepancy
it now expects between a hot first half of the year and cooler second half.
The forecasting unit of Toronto-Dominion
Bank released a report on Wednesday that maintained its call for housing
resales this year to rise 2.1% to 475,000, and the average price to gain 9% to
$349,000.
"While sales in Q1 were slightly
higher than our late-2009 forecast, we view the strength as borrowing from
future sales in a move by buyers and sellers to pre-empt regulatory and
interest-rate changes," TD said in its report.
The bank said that people in Ontario and British
Columbia are pushing ahead with home purchases to
avoid higher costs associated with harmonized sales taxes that take effect in
those provinces in July.
As well, it said homebuyers across the
country have felt rushed to avoid higher interest rates. Major banks have
already started raising their borrowing costs, and the Bank of Canada is
expected to start hiking its overnight target rate from a record-low 0.25% in
June or July.
The more accelerated cooling effect during
the second half of this year will lead to lower prices than previously thought
in 2011, TD said. It now expects the average home price to fall 2.7% to
$339,700 next year; it previously called for a 1.6% price gain.
TD said housing prices in Canada
are currently overvalued by about 15%, based on longer-term economic factors
such as income growth. That gap should narrow to 10% by the end of next year,
it said.
