The vibrant pace of growth and activity in the Canadian residential real estate sector is likely to moderate quite a bit in late 2017 as well as early 2018, in large part due to the possibility of higher interest rates along with government policies aimed at chilling demand in major markets.
This according to a recent Reuters quarterly poll of industry analysts nationwide, some from Canada’s biggest banks.
The survey also found that the Canadian property market—flush from nearly a decade of cheap credit and sustained domestic and international demand—is expected to generate house price inflation in the neighbourhood of 8 per cent this year.
The poll added, however, that the recent slowdown in activity and price growth in Toronto is showing little signs of becoming a national contagion that might induce further housing price measures—at least, not until interest rates increase.
“It depends on how quickly we get follow-up rate hikes, how much these other mortgage regulatory changes end up doing on their own,” CIBC chief economist Avery Shenfeld said.
Toronto house price inflation for 2017 is predicted to cool further to 11 per cent for 2017 and 5.5 per cent in 2018, the poll showed. Majority of respondents stated that the Toronto correction is likely to last anywhere between 3 to 12 months, with the largest estimates for the decline being as big as 30 per cent.
“The government policy changes both in British Columbia and Ontario have been very helpful in cooling the market and taking the froth out of both Vancouver and Toronto housing markets,” BMO Capital Markets senior economist Sal Guatieri said.
“Buyers and sellers now have come to the conclusion that what we were seeing in both markets prior to the correction was quite an aberration, very unusual and clearly quite unsustainable.”
Commentary: Slowdown doesn’t necessarily translate to greater affordability
Nearly 2/3 of local markets remain in ‘balanced territory’—DLC