Canadian resale housing lands safely, prices up
By Ka Yan Ng
TORONTO (Reuters) - The Canadian residential housing sector is landing safely after a wild ride over the past three years, Toronto-Dominion Bank said in a report on Thursday.
Looking ahead, the economics unit of Canada's No. 2 bank said it expects improved home sales and a higher average price next year, largely because housing affordability will likely be extended as uncertainty lingers about the global economy.
"The most important development since our September forecast is that increases in borrowing rates foreseen three months ago by TD Economics and most forecasters have been delayed," said Pascal Gauthier, senior economist, at TD Bank.
The bank raised its annual home sales forecast for 2011 by 8 percent to 420,000 units, but that still stands lower than its 2010 forecast of about 455,000.
It also downgraded its 2012 forecast to 400,000 units from a previous view of 437,000.
The TD Bank report follows Tuesday's decision by the Bank of Canada to keep its key overnight interest rate at 1 percent, which set the stage for rates to stay on hold for some time. TD expects the central bank to start ratcheting up interest rates in the middle of next year.
Overall, the Canadian housing sector has avoided two extreme scenarios over the past three years when resale prices dropped sharply in 2008, then quickly rebounded as mortgage rates and lower prices supported the turnaround.
"Sidestepping both worst-case scenarios of a bubble and crash, the resale market appears to have landed safely, and somewhat earlier than we anticipated three months ago," said Gauthier. Continued...