Canada housing to slow, stagnate, but not crash: Scotiabank
By Andrea Hopkins
TORONTO (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.
Scotiabank senior economist Adrienne Warren said she expects a decline in prices of around 5 percent but that the drop will likely play out over the next couple of years rather than happen quickly.
She also said demographics, including steady immigration and the preference of baby boomers to remain in their homes, will support housing demand.
"Contrary to some dire predictions, population aging will not fuel a demographically induced sell-off in Canadian real estate. However, an aging population does point to a lower level of housing turnover, sales and listings," Warren said in the report, the bank's annual real estate outlook. Continued...