TORONTO (Reuters) - Sales of existing homes in Canada in May slowed by 3.1 percent from April and prices declined from the year before, offering more evidence that the country’s long-lived real estate boom is starting to flatten out.
The Canadian Real Estate Association (CREA) said on Friday that sales fell in May from April in about 60 percent of the markets it tracks, led down by the Greater Toronto Area, the country’s largest market.
However, CREA raised its sales forecasts for this year, saying that low interest rates continue to sustain an active housing market, particularly in the Prairie provinces of Alberta and Saskatchewan.
On a year-on-year basis, sales rose 9 percent in May, reflecting a slowdown last spring following the introduction of tighter mortgage rules by the federal government.
“Returning to an average level of sales activity still leaves Canada’s housing market in great shape,” CREA President Wayne Moen said in a statement.
The average price fell on a year-on-year basis for only the second time in the past 1-1/2 years, retreating 0.3 percent to C$375,605 ($368,240) due to sharp declines in British Columbia, where the once-hot Vancouver market has begun to cool.
Canada did not experience the housing market crash that drove the United States and other Western countries into recession. While the Canadian market did retreat in 2008, it rebounded swiftly on the back of the low interest rates that have continued to drive activity.
The prospect of rising rates has spurred concern that the market’s eventual pullback could be a harsh one.
The Bank of Canada warned on Thursday that the housing market and high household debt - much of which is tied to home purchases - are the two biggest domestic risks to Canada’s economic outlook.
The federal government housing agency said on Thursday it saw the market cooling toward the end of 2012.
The number of newly listed homes edged up 0.3 percent in April, resulting in what CREA called a “more balanced national housing market”. Housing inventory was at 5.9 months, up from 5.7 months in April.
While momentum may be slowing, CREA still expects sales to rise in 2012 from the previous year, but it expects sales to pull back slightly in 2013.
It sees existing home sales of 475,800 units this year, up 3.8 percent from 2011, and up from its March forecast of 458,800. Sales in 2013 are seen at 470,200 units.
CREA sees an average price of C$370,700 in 2012, and an average price of C$378,200 in 2013.
Reporting By Cameron French; Editing by Peter Galloway