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Condo 'softness' to continue, Royal LePage says

A condo owner looks onto a neighbouring condo under construction in Toronto. RBC says housing affordability eroded during the past three months.

The operator of Royal LePage says the market for Canadian houses is poised for an upward swing this year but the condo market will remain soft awhile longer.

The chief executive of Brookfield Real Estate Services says the market is in the late stages of a downward trend that resulted in fewer houses trading hands.

Sales volumes for houses will begin to trend upward in late 2013 and house prices will strengthen, with increases returning to long-term averages but the condominium sector may continue to see "softness" in the short term, Brookfield's Phil Soper said in an earnings announcement Wednesday.

"While we have seen modest price appreciation recently, homebuyers have been taking a slightly cautious stance as evidenced by lower sales volumes in many regions across the country for the quarter," Soper said as Brookfield Real Estate Services announced a lower second-quarter profit.

The low interest rates that Canada has been experiencing are appealing for would-be buyers but consumer confidence hasn't completely rebounded, Soper said.

"Nevertheless, indicators point to a steadily improving economy that will help the market return to historical sales volume and house price appreciation averages.

The comments come as Brookfield Real Estate Services Inc. reported $3.4 million of net income in the second quarter, or 36 cents per share. That was down from $7.9 million or 83 cents per share a year earlier.

Brookfield Real Estate Services is a publicly traded subsidiary of Toronto-based Brookfield Asset Management, which is primarily focused on real estate, electricity generation and the forestry sector through its holdings.

Brookfield says royalties received from its brands, which include Royal LePage, Johnston & Daniel and Via Capitale, dropped to $9.7 million in the second quarter from $10 million a year earlier.

"It is the view of management that we will see sales volumes start to trend upward on a year-over-year basis in late 2013, and as we work our way through 2014 we also expect to see house price appreciation return to long-term historical averages," Soper said.

"The condominium sector may see some softness for the near term as the market absorbs new supply," said Soper. "In the longer-term, however, we believe that changes to demography, city planning and customer preferences all presage positive growth for this category."