Canada housing to slow, stagnate, but not crash -Scotiabank

Mon Mar 18, 2013 2:50pm EDT
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* Bank says housing will continue to slow, but no crash seen

* Immigration, baby-boomers seen supporting demand

* Long stagnation in prices possible, even as U.S. recovers

By Andrea Hopkins

TORONTO, March 18 (Reuters) - A slowdown in Canada's housing market will continue through 2013 and years of stagnation may follow, but no crash is likely because demographic trends will support demand in the medium term, a report by Scotiabank said on Monday.

The report by Canada's third-largest bank said that home sales have already dropped more than 10 percent from spring 2012, with prices leveling off but not yet falling except in particularly hard-hit markets.

Housing, which slowed but did not crash as a result of the global financial crisis, helped sustain Canada's economy through much of 2010 to 2012 but is now starting to slide just as the U.S. housing sector has begun a clear recovery.

Scotiabank said the housing slowdown will trim a quarter of a percentage point from Canada's economic growth in 2013 and 2014, while the U.S. housing recovery is adding half a percentage point to annual growth rates there.

While Canadian home sales may continue to slump, the report said, prices will likely remain above year-ago levels until at least the second half of 2013, and will not drop as dramatically as they did in the United States.   Continued...