Housing boom isn't a bust

Canada's housing boom has ended, but the shift to a buyer's market is no reason for alarm, according to an analysis by one major bank yesterday.

Another big bank contended that even the recent 10-per-cent fall in Canadian housing prices is significantly overstated.

"We argue against taking an overly alarmist view to domestic housing prospects," said Adrienne Warren, economist and real-estate market specialist at Scotiabank.

"This is not a U.S.-style bust caused by overbuilding, speculative buying and imprudent lending, but rather a cyclical slowdown accompanied by a valuation adjustment in several large centres where booming demand conditions and temporary supply constraints led to an overshooting in prices."

In a separate analysis, TD Bank calculated that home prices last month were down only 4.6 per cent from a year earlier, less than half the 10.9 per cent reported by the Canadian Real Estate Association.

"As suspected, the difference arises predominantly because of large double-digit drops in sales in some of Canada's most expensive markets in British Columbia, which our index controls for," TD said, noting that B.C. sales were down 50 per cent from a year earlier. "Since average prices in B.C. are the highest in the nation, the drop in sales tends to overstate the extent of price declines."

Survey results by polling firm Ipsos Reid, also released yesterday, suggest sales in B.C. will be falling further. Nearly 80 per cent of British Columbians surveyed said it's not a good time to sell a home. Nearly six in 10 also expected housing prices to be lower in a year's time -- by an average of 6.7 per cent in their communities.

Meanwhile, Scotiabank in its report conceded that Canada's longest housing boom of the post-war period has come to an end.

While the reversal has been most pronounced in the previously hottest markets of Western Canada, including Calgary, Edmonton and Vancouver, conditions in virtually all regions are tilting back in favour of buyers for the first time in years, it said.

Canadian home prices will likely fall further in light of the expected weakness in employment and in the economy, but much less than they have in the U.S. The report projected national average prices will fall up to 15 per cent from their late-2007 peak.

Much of the decline will occur in Canada's three western-most provinces and will leave intact most of the significant price appreciation of recent years, it said.

(prepared by Eric Beauchesne/Vancouver Province)