According to the Canadian Real Estate Association, national home sales will hit a near decade-low in 2019, as mortgage stress testing and rising interest rates prohibit people from entering the market.
Only 456,000 units of housing are expected to be bought next year, which is a marginal decrease of 0.5% from 2018. The average national sale price through the Multiple Listings Service (MLS) is expected to be $496,800—a 1.7% increase over this year’s prices.
Ontario and British Columbia will account for the lion’s share of the decline. According to Ben Myers, president of Bullpen Research & Consulting Inc., many residents in the Toronto area, specifically, are choosing to rent longer because they cannot afford the homes they would like to buy.
“The biggest factor is B-20, the new stress test, by OSFI,” he said. “It’s reducing credit availability in the market and people can’t afford the home they wanted, so people are choosing to rent longer to afford the home they want instead of the home they don’t want, that they’d sell three to four years down the road.”
In B.C., the provincial government has implemented several pieces of legislation designed to cool the market, and according to Robert Mogensen, a broker with The Mortgage Advantage, it’s done just that. The OSFI-mandated B-20 has also quelled demand, he added.
“I’d attribute it to a combination of three things,” said Mogensen. "The new mortgage stress test rules, which have had a huge impact on buyers at all levels, whether they’re first-time or people moving up the chain; secondly, rising interest rates have compounded that new set of rules; thirdly, it seems the Chinese have lost their appetite for rapidly buying properties in Vancouver to some degree due to the new empty condo tax. We don’t see condos being sold to Chinese investors the way they have for the last several years. All of those things together have contributed to the depressed market.”
Quebec and the Maritimes—particularly Montreal and New Brunswick—will continue “historically strong” performances, according to CREA.
"The national forecast has been revised lower … as an anticipated rebound in sales in British Columbia has so far failed to materialize, the recovery in Ontario sales this summer has now run its course and sales activity in Alberta has edged lower. These developments were partially offset by stronger-than-expected sales activity in Quebec," it said in the report.
With files from The Canadian Press