ScotiaBank delivered some less-than-optimistic news
to mortgage brokers and those who depend on the housing industry for their livelihood.
“Residential investment stalled last year, as affordability constraints tempered home sales, and builders scaled back the number of new developments,” Adrienne Warren, senior economist for ScotiaBank wrote in her Industry Trends report Wednesday. “We expect the sector will remain on a more subdued trajectory over the next several years, imposing a modest drag on output growth.”
The housing industry has long been a major contributor to the Canadian economy; with new contruction, renovations, transfer costs and legal and appraisal fees contributing $128 billion last year along, according to Warren.
ScotiaBank, however, is forecasting resale activity to drop over the course of the next two years, which will contribute to a softening housing market.
“We expect resale activity to edge lower in 2014-2015,” Warren wrote. “Rising mortgage rates, combined with high home prices and stricter mortgage regulations, will strain affordability, especially for first-time buyers in major urban centres.”
As a result, construction – especially in the multi-unit sector -- is expected to slow and prices are forecasted to hold steady.
“At the same time, population growth and relatively healthy labour market conditions suggest sales should hold near their 10-year average,” Warren wrote. “Softer sales should in turn slow house price appreciation, with greater downside price risk in the more amply supplied high-rise segment than for single-family homes.”