Canada’s resale housing market will set new records in 2006, according to a revised forecast prepared by The Canadian Real Estate Association.
After setting the fifth consecutive annual record in 2005 at 483,250 units, CREA expects national resale housing activity to inch even higher by 1 percent to 488,160 units in 2006. Activity is then projected to ease by 3.3 percent in 2007.
Rising interest rates have so far done little to cool resale housing transactions this year, CREA reported. In the first quarter of 2006, sales activity reached its highest level for any quarter on record in Alberta, Prince Edward Island and Newfoundland, and remained exceptionally strong in all other provinces. Alberta is expected to post the biggest annual increase in transactions this year, which reflects its upbeat economic, employment and population growth prospects arising from investment in the energy sector.
After climbing 10.2 percent in 2005, CREA projects that the national MLS residential average price will increase by a further 6.1 percent in 2006 (to $264,519) and 4.7 percent in 2007 (to $276,951). Annual increases in average price are expected to remain above 10 percent in British Columbia and Alberta, where resale housing markets should remain tight.
“Further increases in home prices and interest rates may cause resale housing activity to ease next year, but housing demand will remain very strong and support further price increases,” said CREA’s Chief Economist Gregory Klump.
“Rising household incomes will help to support housing affordability,” Klump said. “The tax cuts outlined in the 2006 Federal Budget will ease the overall tax burden for individuals, put money back in the pockets of Canadians, and increase consumer confidence about making major purchases.”
“The reduction in the GST (Goods and Services Tax) rate to 6 percent and the 1 percent reduction in the federal portion of the HST (Harmonized Sales Tax) will reduce the costs associated with buying, selling and owning a home,” Klump said.
Klump noted that the GST is charged on professional services used by consumers during the course of a housing transaction, such as fees paid to lawyers, appraisers, home inspectors and Realtors. The tax is also charged on the goods and services purchased by consumers when they move from one home to another. These include moving costs, renovations, and the purchase of furniture and major appliances.
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