Unlike the US, Canada’s resale real estate market should see only modest price corrections throughout 2009, predicts Royal LePage. The real estate company’s 2009 Market Survey forecasts that average house prices will dip by 3% from last year while transactions are projected to fall -3.5 % unit sales in 2009.

According to the survey, most consumers are not aware that nationally, Canadian housing market activity peaked in 2007 and has been trending lower since. “We are well into this inevitable cyclical correction.”

“Emotional reaction to recent economic and political instability did much to dampen consumer confidence during the latter part of 2008, causing a marked slowdown in house sales activity. However, as a more rational understanding of the issues gains ground, together with a wide range of announced corrective measures, consumer confidence is anticipated to recover, prompting real estate activity to pick up once again in the latter half of 2009,” he said.

The most significant price decreases are forecast for Canada’s most expensive city, Vancouver, which has experienced above-average price increases for most of the decade. By contrast, real estate in Montreal and Ottawa is poised to remain stable, while both Calgary and Edmonton’s housing markets are anticipated to grow.

While most homeowners would be relieved by the survey’s buoyant tone, Garth Turner, author of Greater Fool: The Troubled Future of Real Estate , says he’s disturbed by it. “The downturn only started for Canada two quarters ago, and Soper predicts it will be over in three quarters. How’s that possible when the U.S. will see a fifth dismal year before it hits bottom?” he questioned. “Canada is following an identical trajectory to the U.S., just with a two-year lag. It will collapse, though more gently than the States.”

Royal LePage has been off the mark with past predictions, however. In 2007, the firm predicted momentum would carry over into 2008 and position Canada’s real estate market for steady, yet moderate growth.

Tsur Somerville, associate professor at the University of British Columbia’s Sauder School of Business, and director of UBC’s Centre for Urban Economics and Real Estate, takes a stand somewhere between that of Soper and Turner. He agrees with Soper that it’s unlikely Canada will go the same route as the U.S.

“Conditions here are not the same. There isn’t nearly as much sub-prime lending, or as much speculative building here,” he says.  Tsur says there still remain a lot of risk factors for Canadian real estate. For example, condominiums under construction with presales could face problems. “If buyers made 5% down payments and prices fell 20%, I’m not sure they will come through on the contract.”

Further, investor-buyers who find themselves in a have-to-sell situation might not be able to refinance as lenders tighten their purse strings. Tsur also anticipates problems for commercial real estate buyers who might also struggle with refinancing their property.

If you are looking at buying a property soon, make sure you do your homework.  You may want to wait it out a few months or ensure that it is going to be a long-term investment.