A new bank report is suggesting mortgage brokers may be in for an extended slowdown in the real estate market.
"Canada's housing market is expected to avoid the sharp downturn witnessed in the United States and Europe," said Adrienne Warren, a senior economist at Scotiabank. "However, the downside risks to domestic housing activity are increasing. The full impact of the slowdown may not become fully visible until mid-decade."
According to a Special Report on Canadian Housing released today, record prices combined with incremental regulatory tightening will continue to cool the marke -- low borrowing costs notwithstanding.
Another factor – one that brokers can attest to – is waning consumer demand. Scotiabank wagers that “pent-up demand has been effectively exhausted after a decade-long housing boom, with Canadian home ownership at record levels,” concludes the report. “The global outlook also has become much more challenging.”
The report suggests brokers and other real estate professionals should brace for a cumulative 10 per cent decline in property values over the next 2-3 years, as housing demand, said Ms. Warren.
"The correction will be concentrated in the Toronto and Vancouver markets, where supply risks and affordability pressures have the potential to trigger larger price adjustments," she added.
High personal debt loads and balance sheets are another reason home sale originations for brokers will slow. They’re heavily skewed to real estate, finds the report, leaving “Canadians vulnerable to an adverse shock, including a sharp rise in unemployment and/or a sharp drop in home prices.”