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A correction in Canada's blistering real estate market is set to take hold in 2013, economists at TD said on Wednesday in a note to clients. The remarks come in the wake of figures released by the Canadian Real Estate Association (CREA) showing sales of existing homes fell 4.5 percent in January from the previous month.
The fall in sales marks the first monthly decline in five months and the largest month-on-month drop since July 2010.
The decline was sharpest in some of the country's largest cities, including Toronto and Montreal.
Average prices increased by 2 percent to $348,178, the smallest increase in the past year.
"This month's decline is likely reflective of what will shape up to be a softer year in sales, especially when it comes to Toronto and Vancouver condos," Jacques Marcil, Senior Economist at TD, said in a note. "We anticipate growth will slow down in 2012 both in terms of sale volumes (+0.5%) and prices (+2.5%)."
"In contrast, the actual correction is foreseen to start in 2013, with both resales and prices turning negative."
In recent weeks a number of executives at the country's largest banks and economists have voiced concerns over high real estate values. The head of the country's largest seller of uninsured mortgages recently told BNN that certain areas of Canada's real estate sector are "overheated."
"We're comfortable with the market on an overall basis -- there are pockets that are a little bit weak," Martin Reid, president of Home Capital Group, tells BNN. "We see 2012 leveling off, maybe a bit of a soft landing in some parts. The Vancouver market may be a little bit overheated."