How’s the Market? What’s Ahead for Real Estate?

Canadian Market at a glance:

  • Sales are up the past 3 consecutive months
  • Increased interest rates
  • Number of qualified buyers are down
  • Demand is larger than supply

Although no one can predict the future with absolute certainty, there are signs that the Canadian housing market is starting to stabilize after a downturn in the first half of the year.  Experts forecast that in most areas of the country housing prices will remain high, rents will rise, and mortgage rates will continue to creep up.  So what does that mean for home buyers and sellers?

Housing Market Shows Signs of Stabilizing

After years of skyrocketing housing prices, much of Canada is now witnessing the effects of governmental-induced slowdown.  A combination of rising interest rates, stricter lending laws, and provincial policy changes was put in place to cool down an overheated market that had led to increased debt levels, decreased affordability, and historically-low inventory levels.  These measures triggered a sales decline during the first part of the year.  However, the market seems to be stabilizing now – the Canadian Real Estate Association has reported positive sales increases for the past consecutive months.*

This is ultimately good news for both buyers and homeowners.  Buyers will benefit from a more balanced market as inventory levels increase and speculators pull back.  Homeowners who feared an impending “bubble burst” can rest easier knowing that the interventions put in place were explicitly designed to avoid such scenarios.

Rents Increase by Double Digits

There are signs that an already hot rental market may be overheating now.  A recent report shows rental prices rose by double digits in 13 out of 25 Canadian cities in the past year.**  This is good news for sellers since residents become more incentivized to purchase a home as renting becomes more expensive.  It also signals a growing opportunity for investors interested in buying a rental property to see lucrative returns.

Increased Interest Rates  

The Bank of Canada has raised its benchmark interest rate by a quarter point for the fifth time since last summer.   The bank’s rate is now set at 1.75 per cent – the highest it’s been in almost a decade.  Canada’s central bank has kept its interest rate at record lows for several years to stimulate the economy following the economic slowdown of 2008, but has since begun to ratchet it higher as the economy gets back on sounder footing.  “The reality is that the economy is at its capacity and is no longer needing stimulus,” central bank governor Stephen Poloz said at a news conference following the announcement. “And so it’s our job to prevent the thing from overheating and creating inflation pressures down the road.”***

What Does It All Mean For Me? 

Montreal is among three Canadian housing markets to watch heading into 2019.  In an article for PWC Canada, Scotiabank economists Marc Desormeaux and Mary Webb noted that the Montreal housing market has managed to avoid the negative effects of the new mortgage rules due to its largely affordable price point relative to more expensive prices in other regions, including Toronto and Vancouver.  Montreal residential construction increased last year and should remain healthy through 2019.  Despite many condo projects under construction, builders are still trying to keep up with eager buyers.

If you’re in the market to sell, there’s good news for you.  Demand for housing and a strong economy have kept prices high.  But the new, more stringent mortgage requirements have narrowed the pool of potential buyers who can afford to enter the market.


*Canadian Real Estate Association

** CTV News

*** CBC News

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