Housing markets around the globe are losing momentum, while Canada is still marching to the beat of its own drum. However, with measures aimed at cooling down the market, which include mortgage rule changes and higher interest rates, a slowdown is expected in the first half of 2018, reports The Huffington Post.
Data released by the Global Property Guide, a site for residential estate investors, shows that in the third quarter of 2017 Canada saw the fourth-fastest property price gains in the world, surpassed only by Iceland, Hong Kong and Macau.
By contrast, compared to the same period in 2016, 21 out of the 47 housing markets surveyed by the GDP experienced a drop in prices. The number increased significantly from the second quarter of 2017 when year-over-year declines were recorded in only 15 countries.
Two-thirds of the countries included in the survey suffered a slowdown, be it in the form of lower prices or a slower price growth. Compared to New Zealand where there’s barely any movement going on, Canada is experiencing a boom despite the measures taken to slow prices down, such as the foreign buyer’s tax introduced in Vancouver and Toronto or Ontario’s Fair Housing Plan.
Some changes were indeed noted, but not for all housing types. For instance, even though prices for detached homes have slowed down, condos are still experiencing a strong price growth. According to the Real Estate Board of Greater Vancouver, condo prices in the city went up by 26% last year, while detached homes only by 7.9%.
Is Canada’s Housing Market Headed for a Change?
2018 is expected to bring major changes in Canada’s housing market. The Bank of Canada estimates that the new “stress test” coming into effect in January 2018 will make it harder for one in ten potential homebuyers to purchase property. This translates into a 21% decrease in homebuyers’ buying power. Furthermore, The Bank of Canada’s intention to keep increasing interest rates this year is also bound to affect sales activity in Canada.
According to a report from credit rating agency DBRS from last autumn, mortgage borrowers could face a “payment shock” in the next years as increasing mortgage rates will put pressure on household finances.
Nationally, the Canadian Estate Association expects home sales to drop by 5.3% in 2018. In British Columbia, the association anticipates that house prices will remain flat, while in Ontario it foresees a 2.2% drop. CREA further notes that these changes will also have an impact on Canada’s economy, setting it back by $1.1 billion. This means there will be 12,000 fewer jobs available.
While this might sound like bad news, CREA believes that Canada’s housing market will bounce back in the second half of the year, once homebuyers have gotten used to the new market conditions.
Original article published by huffingtonpost.ca