Leading into the final weeks of 2018, several forecasts for the Canadian housing market have been published, with predictions for final results for 2018 as well as the outlook for 2019. While the reports from Canadian Real Estate Association (CREA), the Royal Bank of Canada (RBC), and the Canada Mortgage and Housing Corporation (CMHC) differ in terms of some specifics, all three seem to agree that Canada’s housing market will see some recovery in the new year, after a modest dip in prices and sales numbers in 2018.
CREA’s quarterly forecast, published in mid-September, includes data through 2018 and forecasts that 2018 will see a fall of 9.8% in the number of housing transactions as well as a decline in the average price of 2.8%. While the Ottawa-based trade organization sees solid fundamentals, including Canada’s economic performance and continued demographic expansion, it cites higher interest rates and more stringent regulation, in the form of the mortgage stress test, as reasons for the 2018 slowdown. CREA expects the Canadian property market to experience modest growth in 2019, with a 2.7% increase in home prices and a 2.1% increase in the number of home sales. It forecasts the average price of 2019 residential sales to be $508,400. Thus, while CREA does see a rosier picture for next year, it is noteworthy that the forecast increase in home sales of just over 2% for 2019 is less than a quarter of this year’s expected decline.
In mid-October, RBC’s monthly housing update was published, and it includes some of the financial powerhouse’s forecasts for 2019. RBC forecasts a 10.2% decline in home sales for 2018, which, when averaged with CREA’s forecast, suggests that a decline of approximately 10% is likely for this year. However, the two reports differ significantly in terms of the 2018 average residential sale price, with RBC’s 3.1% almost 6% higher than CREA’s forecast of -2.8%. RBC’s 2019 home price forecast of +0.8% is more subdued than CREA’s rosier 2.7%.
In terms of factors limiting upside potential for residential real estate in the new year, RBC concurred with CREA with respect to rising interest rates and the mortgage stress, but also cited various “market-cooling measures” by provincial and local governments in BC as well as a fall in affordability, a topic that the bank reported on in-depth in September.
In early November, CMHC released its own outlook for Canada’s housing market in 2019. On a nationwide basis, the mortgage and affordable housing agency focused on numbers rather than percent changes and sees the residential sale price in the upcoming year averaging $511,500, just $3,100 higher than CREA’s $508,400. CMHC forecasts the quantity of residential sales for 2019 to be 487,900, approximately 15,000 more than CREA’s 472,700. The Crown corporation summarized its near-future outlook as “moderate,” citing modest declines in housing starts and a less-than-anticipated growth in the 25-34 age group, which may result in lower demand for multi-unit starter residences.
In addition to many of the limiting economic factors cited by CREA and RBC, CMHC included interference with global trade as a risk to the Canadian housing market, in spite of some progress in terms of recent agreements to replace parts of NAFTA. CMHC also mentioned high debt loads by many Canadian households as a headwind to further growth in housing.