Housing market outlook 2015

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Home prices are expected to rise or remain stable in most Canadian markets this year, according to an in-depth report released by one industry organization.

“With an increased supply of inventory on the market going into the New Year, the average sale price is expected to remain stable or rise modestly in most cities in 2015,” RE/MAX states in its recently released 2015 Housing Market Outlook Report. “Montreal (1%), Quebec City (1.5%), Ottawa (1.6%) and Sudbury (1.6%) are expecting a modest rise in average residential sale price, while little change in prices is expected in Winnipeg, Saskatoon and St. John’s.”

Condominium purchases are expected to account for a large portion of transactions in many major cities this year, as higher prices and limited single-family inventory forces buyers – especially first timers – to look to high-rise units.

And while buyers in 2014 still felt the effects of 2012’s tightened lending guidelines, the organization believes mortgage borrowers will have largely adapted by the end of the year.

“Many first-time buyers continued to feel the impact of the Canada Mortgage and Housing Corporation’s tightened lending criteria, which were revised in 2012,” the report states. “The new mortgage lending regulations have delayed the entry of first-time buyers into the market in many regions, thus slowing down the rest of the market.

“The new mortgage rules will likely have less of an effect in the coming year as buyers adapt to the new regulations and make the necessary changes to meet the criteria.”

The housing market is also expected to be bolstered by a strong national economic outlook, as well as continued immigration. Canada expects to welcome between 260,000 and 285,000 new permanent residents this year.
  • LOL on 2015-01-08 5:36:48 PM

    'Canada Is In Serious Trouble' As Debt, House Prices Climb, Deutsche Bank Declares
    The Huffington Post Canada | By Daniel Tencer
    Posted: 01/08/2015 3:33 pm EST Updated: 19 minutes ago

    It was little more than a year ago that Deutsche Bank declared Canada’s housing market to be the most overvalued in the world, and on Thursday the German-based bank doubled down on its bearish assessment of Canada.

    Residential real estate in Canada is overvalued by 63 per cent, according to research from Deutsche Bank chief international economist Torsten Slok.

    Broken down, Slok sees the market as being 35-per-cent overvalued when compared to incomes, and 91-per-cent overvalued when compared to rents. That’s a more bearish assessment than most. The Bank of Canada estimates the market is overvalued by between 10 per cent and 30 per cent.

    But those are similar numbers to those at the Economist magazine, which for years has been calling Canada’s housing market overvalued. It pegs the overvaluation at 32 per cent, when compared to incomes, and 75 per cent, when compared to rents.

    “Canada is in serious trouble,” reads the title of a chart from Slok’s report, showing Canada’s household debt, as a percentage of income, climb to 50 per cent above current levels in the U.S.

    (Note: Deutsche Bank's numbers are similar but not exactly the same as what others have reported. StatsCan has Canada's ratio even higher, at 162 per cent, while in the U.S. the number was at around 104 per cent in 2013.)

    The charts, published on Thursday by Business Insider, read like a list of the warning bells analysts cite when arguing Canada is in for a major housing market correction.

    Besides household debt at very high levels, Deutsche Bank noted that mortgage credit growth is slowing, even as prices and sales continue to boom.

    And if the housing market does come down, Canada’s economy will be more exposed to the correction than it would have been in the past. That’s because, with the housing market taking over as a job-creator from the struggling manufacturing sector, Canada has grown more dependent on construction jobs than it has been in the past.

    The bank notes it’s not just mortgage debt: Canadians’ credit card debt and personal lines of credit experienced large growth over the past half decade, even as disposable income grew only slightly.

    Auto loan debt in particular has been of concern to some analysts. In a report last fall, Moody’s reported that outstanding auto-loan debt has quadrupled in Canada over the past six years, to $64 billion last year, from $16.2 billion in 2007.

    Canada’s own bank economists have been a lot more sanguine on the state of Canadian housing and debt than many foreign observers. They have argued for years that Canada’s high house prices and debt loads can be sustained, barring any major shock to the economy.

    Well that shock may have arrived, in the form of a collapse in oil prices, which may have more impact on the housing market than most people would expect.

    David Wolf, a manager at Fidelity Investments and a former Bank of Canada adviser, noted in a commentary this week that, in Canada, commodity prices and house prices track each other fairly closely.

    The Deutsche Bank report notes Canada isn’t the only country wondering what to do with an overinflated housing market. Australia and Norway both have housing markets that are about 50-per-cent overvalued.

    But one thing to keep in mind is that Canada’s large house price increases came after years during which the market could be said to have been undervalued.

    BMO economist Sal Guatieri mentioned this in a client note last fall. He showed that while house prices in Canada have outgrown those in the U.S. they are still way behind the growth seen in Norway, another country whose economy is linked to oil.

    From this perspective, Norway looks like it’s in much more trouble than Canada:


  • Jas on 2015-01-08 6:55:59 PM


  • Meltdown 2015 on 2015-01-09 11:13:13 PM

    These sites should be banned for misleading Canadians . Shame on mortgagenews.ca

  • Meltdown 2015 on 2015-01-09 11:13:15 PM

    These sites should be banned for misleading Canadians . Shame on mortgagenews.ca

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