Biting cold headwinds to hit Canadian markets – poll

Biting cold headwinds to hit Canadian markets – poll

Biting cold headwinds to hit Canadian markets – poll

In a Reuters survey of 16 real estate market analysts conducted earlier this month, industry observers predicted that home prices on the national level will rise by a median 1.7% this year, slightly slower than the 1.9% figure in the June edition of the study.

The experts polled attributed the slowdown to the upward trend in interest rates along with more stringent mortgage rules. These chilling factors will also weigh upon housing sales numbers, the observers said.

“We are going to see very modest price growth across all markets,” BMO Capital Markets senior economist Robert Kavcic said. “We are seeing Toronto and Vancouver still adjusting to past policy measures and Bank of Canada rate hikes.”

Residential real estate values are expected to rise another 2.1% next year, a similar level to that in the June forecast. Prices are also set to increase by another 2% in 2020, although this was lower than the 2.5% in the previous forecast.

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The study also provided outlooks on the acknowledged red-hot markets. Toronto prices are predicted to increase by 2% this year, virtually unchanged from June. However, home prices are expected to go up by 3% in 2019, up from the 2% projection in the previous survey.

“The [GTA] housing market is back on an uptrend following the B-20 adjustment phase, reflecting a build-up in pent-up demand,” Laurentian Bank chief economist Sebastien Lavoie noted.

Meanwhile, prospects for Vancouver have become murkier. Average home prices in the market are projected to grow by 1.8% this year, considerably less than half the forecast 5.5% in the previous survey. Expectations for 2019 have similarly deteriorated to just 1.7%, down from 3.4% in June.

“In Vancouver, the market takes a longer time to find a new equilibrium path due to the intended measures from the [British Columbia provincial] government to ease overheating pressures,” Lavoie added.

TD deputy chief economist Derek Burleton warned of the impact that even a miniscule increase to the record-low rate of 1.5% upon households already laboring under large amounts of debt.

“On the downside, the economic environment remains risk-filled, with trade tensions arguably the most pressing near-term risk to regional job markets,” Burleton said. “Interest rate sensitivity is high relative to past cycles, so this may prove more meaningful in crimping demand than we currently have built into the forecast.”