The HST and higher interest rates forecast by the middle of 2010 are expected to push the resale housing market downward in 2011, according to the forecast by the Canadian Real Estate Association.
The association forecasts B.C.'s resale housing market will jump 19.8% this year with total number of units sold rising to 101,900 units from 85,028 in 2009. Double digit increases in B.C. and Ontario this year is expected to push national sales to a record 527,300 units, up 13.3% from the total number of units sold in 2009.
As a result, Canada's average housing prices this year are expected to rise 5.4% to $337,500 from $320,333 last year. B.C.'s prices are expected to rise 4.2% to $485,500.
Much of the sales activity will be before the HST comes into effect in Ontario and B.C., and will likely slow as the Bank of Canada increases interest rates, as is expected by the latter half of the year.
Interest rate increases are likely to further dampen the housing market in 2011, with an expected decline of 7.1% in the number of units sold. B.C.'s market is forecast to see the largest decline of 12.9% to 88,800 units sold in 2011.
While the number of units sold will decline sharply, prices, however, will not fall as fast. The price of an average home in B.C. is expected to fall only 1.8% to $476,600, a bit higher than the national average decline of 1.5%.