Residential real estate activity should moderate further in 2009 alongside a general weakening in domestic economic conditions, says a research report released Wednesday by Scotia Economics.

Real Estate Trends, authored by senior economist Adrienne Warren, said Canada can expect a 15 to 20 per cent decline in the volume of resales this year with a further 10 per cent drop in average prices.

“Centres with the largest supplydemand imbalance, including Vancouver, Sudbury (Ont.) and Calgary, have relatively greater downside risk,” said the report.

Also on Wednesday, the Canadian Teranet-National Bank composite house price index showed Calgary experienced a 7.6 per cent drop in prices in December compared to the previous year. The index said this was the sixth consecutive month of decline in Calgary. The Calgary index has shown declines in 13 of the past 16 months, since it also declined in each of the seven months from September 2007 through March 2008, said the index report.

The Scotia Economics report said that while home sales and construction in Canada seem set to turn down further this year, the outlook for renovations is somewhat mixed.
“The industry has been growing rapidly in recent years, with inflationadjusted outlays rising an average of 8.5 per cent annually this decade,” wrote Warren.

“Spending slowed progressively through 2008, but outlays are still estimated to have increased about four per cent.”

She said Ottawa’s recently announced renovation tax credit for households has the potential to provide a significant boost to the industry in 2009, but the initiative’s overall effectiveness in filling the construction gap may be limited.

In the commercial sector, the report said office market activity in the country is expected to cool after several years of strong growth.

Vacancy rates are expected to climb in all major centres this year.