Canadian home prices to rise by 3.5 per cent in 2008

According to 2008 Market Survey Forecast of Royal LePage, Canada's leading provider of franchise services to residential real estate brokerages, the Canadian real estate market is anticipated to show steady, yet moderate growth in 2008 after the industry’s busiest year ever in 2007 characterized by strong average house price appreciation and record breaking unit sales.

Nationally, average house prices are forecast to rise by 3.5 per cent to $317,288 in 2008, while transactions are projected to fall slightly from this year's record high unit sales to 500,927 (-4.0 %) unit sales in 2008. Despite the year-over-year reduction in unit sales, the number of homes trading hands in 2008 is expected to remain higher than in all years prior to 2007.

With the most affordable major market homes in Canada, residents of Regina and Winnipeg are forecast to drive the greatest increases in house prices in 2008, as job opportunities and in-migration continue to soar in each city.

While Calgary and Edmonton will continue to boast healthy economies and high levels of home sale activity, the excessively fast run-up of home values in 2006 and the first half of 2007 priced people out of the market, causing inventory levels to rise late in the year. Alberta home price increases will be much more moderate in 2008 as the regional market continues to adjust to the new house value reality.

With the country's highest home prices, Vancouver's steadfast market will continue to expand on the back of a strong provincial economy ahead of 2010 Olympic games. Ontario and Quebec markets are anticipated to maintain their relative strength and vibrancy throughout next year, weathering stormy financial markets and adjusting well to the high value of the Canadian dollar.

In Atlantic Canada, a slight depletion of inventory coupled with high immigration levels will see the housing market growing at a strong and steady pace - Halifax is expected to have higher than national average growth in 2008.

The frenzied pace of price inflation that has characterized the real estate market over the past two years in the resource rich west were unsustainable and should ease substantially in 2008. In Central Canada, price increases peaked in late 2005, and have been moderating since.

From coast-to-coast, the homebuyer demographic is anticipated to swell with first-time purchasers, as many flock to take advantage of recently reduced lending rates, longer amortization periods and the resultant manageable mortgage payments.

Coinciding with the Royal LePage report came data from the Canadian Real Estate Association showing Multiple Listing Service home re-sales broke all previous annual records by the end of November. MLS activity in major markets totaled 345,577 units in the first 11 months of this year, 2.7 per cent more than the previous full-year record of 336,646 in 2005.

Canada is currently enjoying one of the longest housing market expansions in history; however, in 2008 it is anticipated that slowly eroding affordability will cause demand to ease, allowing the market to move toward balanced conditions of strong economic fundamentals, including high levels of employment, resilient consumer confidence, modest levels of inflation and the relatively low cost of borrowing money.