Canadian market sidesteps worst of recession to emerge safely

TORONTO: The Canadian residential housing sector is landing safely after a wild ride over the past three years, Toronto-Dominion Bank said in a report last Thursday, Dec 9.

Looking ahead, the economics unit of Canada's No 2 bank said it expected improved home sales and a higher average price next year, largely because housing affordability would likely be extended as uncertainty lingered 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 TD Bank senior economist Pascal Gauthier.

The bank raised its annual home sales forecast for 2011 by 8% 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%, 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," said Gauthier.

Recent data showed the housing market was moving towards more balanced conditions.

Separately, new home prices in Canada edged higher by 0.1% in October from September, for the third consecutive gain, according to Statistics Canada data.

The top contributors to the rise in the new housing price index were Toronto and Oshawa, Ontario, and Vancouver, British Columbia. Prices rose in eight of the 21 cities in the index, were unchanged in nine and edged down in four.

The index has been on a steady rise since July 2009 with only one monthly decline since then. Analysts had forecast, on average, a 0.1% increase in the October index.

Compared with October 2009, prices were up 2.5%, easing slightly from a 2.7% year-over-year gain in September. — Reuters