The group that represents Canada’s approximately 115,000 realtors says 2016 prices and sales of existing homes have exceeded expectations but predicts that, by next year, the market will level off.

A new forecast from the Ottawa-based Canadian Real Estate Association calls for a 6.1% increase in sales with the final tally for 2016 set at 536,400 — a record. However, once adjusted for population growth, 2007 remains the peak for housing sales in Canada. By 2017, sales will moderate and only increase by 0.2%.

On the price front, the average home is now forecast to sell for $490,700 in 2016, 10.8% annual increase. By next year, prices will be relatively flat, with the average sale price $491,100.

“National sales activity and average prices reached new heights in the first half of 2016 amid a growing supply shortage of single family homes in British Columbia and Ontario, particularly in BC’s Lower Mainland as well as in and around the Greater Toronto Area,” CREA said, in a release.

CREA expects that sales will rebound in Alberta and Saskatchewan in 2017 as oil prices rebound and the provincial economies improve. It expects minimal price growth in those provinces next year.

British Columbia will see a decline in sales and price by 2017. Ontario will see modest growth in prices of 1.5% in 2017 with sales relatively flat.

The moderation in BC and Ontario is expected to impact national prices on the way down, just as it did on the way up. “In these two provinces, luxury sales activity is anticipated to recede from current levels, resulting in a decline in their share of total sales activity,” said CREA.

The new forecast came on the same day as new numbers for May 2016 show sales finally cooling after a record April, but no let up in price growth.

CREA said on seasonally adjusted basis sales dropped 2.8% in May from April, but were still up 9.6% on a seasonally adjusted basis. The national average price was up 13.2% in May from a year ago, but only 9.1% once Toronto and Vancouver were removed from the results.

Gregory Klump, chief economist with CREA, said many of the housing markets in BC and Ontario that recorded a decline in sales are places where inventory has fallen to all-time lows.

“This suggests a lack of supply may be starting to rein in sales amid a continuation of strong housing demand,” Klump said.

Canada’s Crazy Real Estate Ride to Slow Down in 2017 by Garru Marr | Financial Post