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TORONTO (Reuters) - Canadian home prices will likely fall modestly in 2011 as rising interest rates reduce people's ability to buy, Toronto-Dominion Bank said on Wednesday.
The bank's economics group said the outlook for next year has reversed course from earlier forecasts for rising prices, partly because government bond yields have risen faster than expected. Also, markets now expect the Bank of Canada to start raising interest rates in June rather than July.
It said listings this year have been stronger than it had thought, and market balance, as a result, will be "somewhat softer" next year.
In its previous forecast, TD said it expected home prices to rise 10 percent this year, and a small bump in of 1.6 percent in 2011.
TD's forecast for 2010 is largely unchanged at 475,000 transactions with an average price of about C$350,000 ($339,806).
Its updated view for 2011 calls for a modest pullback of 2.7 percent to C$339,700, with seven out of 10 provinces experiencing lower prices. Nationally, sales of existing homes are expected to slip in 2011 to 420,000 units.
British Columbia and Ontario are expected to have the steepest declines, down 3.4 percent and 3 percent, respectively. The three Prairie provinces may have small increases of between 0.5 percent and 1.2 percent, TD said.
Reporting by Ka Yan Ng; editing by Peter Galloway