As an environment characterized by price growth and substantial transaction volume, the Canadian real estate sector is expected to remain a net contributor to economic growth in 2016, a recent Reuters poll found.
This despite the possibility of the housing market becoming a hindrance to the economy within a few years, largely stemming from high levels of debt and purchase slowdown.
The Reuters study—the results of which were released on Wednesday (February 24)—polled 24 economists and housing market analysts, who on average predicted house price hikes of 3.3 per cent this year, 1.0 per cent in 2017, and 2.0 per cent in 2018.
“The housing market may remain a key contributor over the next three to six months as the knock-on effects from home prices, sales and housing starts gains can be lagged,” Diana Petramala of TD Economics said in the survey.
“But the market will likely become a net drag as sales and starts move back in line with historical averages and price growth eases,” Petramala warned.
Household debt continues to be a major factor in the economists’ projections, with the debt-to-income ratio reaching an unprecedented 163.7 per cent. Experts assured, however, that this is no cause for panic yet, as the central bank is likely to maintain its current rates until mid-2017.
“The risk of a correction in Toronto and Vancouver will increase when interest rates go up, which won't be this year,” BMO Capital Markets senior economist Sal Guatieri said. Home building in these red-hot markets is expected continue at a healthy pace of 180,400 to 185,000 units every quarter in 2016, propping up prices in the meantime.