REPEAT: MNI INTERVIEW: Rapid Canada Home Price Dip 'Unlikely'

Repeats Story Initially Transmitted at 15:15 GMT Apr 12/11:15 EST Apr 12

By Yali N'Diaye

     OTTAWA (MNI) - In light of still "supportive" housing market conditions in

Canada, a rapid decline in housing prices "remains an unlikely scenario", Shaun

Cathcart, senior economist at The Canadian Real Estate Association, told MNI in

an exclusive interview.

     He added that the decline of sales over the first two months of the year

"is probably an overstatement of current 'weakness'."

     Last October, the Canadian government announced tighter mortgage rules that

came into effect in January, driving households to pull forward their purchases.

     Sales in late 2017 were boosted by the anticipation of the implementation

of such rules, and rose 4.5% in December and 3.9% in November. But existing home

sales plunged 14.5% in January and a further 6.5% in February. CREA will release

the March data on Friday.

     With the combination of tighter monetary and macro prudential policies, the

Bank of Canada is closely monitoring the response of the housing market, and

expects activity in the sector to slow down.  

     "It will take some time to fully assess the impact of these (new rules), as

well as recently announced provincial measures, on housing demand and prices,"

the BOC said in its March 7 policy statement, referring to additional measures

implemented in February in British Columbia.

     --OVERSTATED 'WEAKNESS'

     Just as gains in late 2017 were more reflective of a shift in the timing of

purchases rather than a real "strength" of market conditions, decreases in

January and February were "probably an overstatement of current 'weakness',"

Cathcart said.

     "That's because some of the sales that would have otherwise been happening

now were moved up into late 2017, and others have likely been temporarily pushed

off as buyers have moved to the sidelines to re-assess how much home they can

now afford, or to save up a bigger down payment, or simply due to heightened

uncertainty at the moment," he added.

     CREA anticipates sales to rebound modestly in the second half of this year

as uncertainty fades.

     --UNLIKELY PRICE COLLAPSE

     On the price front, CREA's Aggregate Composite MLS Housing Price Index rose

6.9% year-over-year in February, marking the 10th consecutive deceleration.

     Notwithstanding tighter monetary policy, Cathcart sees a housing price

collapse as an unlikely scenario, not only because of supportive housing market

fundamentals, but also because he expects the BOC's tightening to continue to be

"slow and steady."

     "When sellers are in no need or hurry to sell, the more likely scenario,

which we have seen many times over the last 10 years, is that fewer deals happen

for a time," he said, which is what is happening now.

     CREA indeed expects housing sales to fall 7% this year from 2017, led by

Ontario and British Columbia. In these provinces, sales are anticipated to

rebound in 2019. 

     For new houses, Statistics Canada reported earlier Thursday that housing

prices decreased 0.2% in February, the largest decline since June 2009, led by a

0.6% drop in the Toronto area, where builders cited "unfavorable market

conditions." 

     On a 12-month basis, national prices appreciated 2.6%, the smallest

increase since July 2016.

     Meanwhile, the more comprehensive Teranet - National Bank Composite House

Price Index was flat in March, the National Bank reported Thursday. This was the

"first time outside a recession when the March composite index was not up at

least 0.2 percentage points from February," the report said, suggesting price

softness could continue in March. 

     On a 12-month basis, the price index rose 6.6%, the smallest gain since May

2016 and a ninth consecutive deceleration. 

--MNI Ottawa Bureau; +1 613 869-0916; email: yali.ndiaye@marketnews.com