Home sales across Canada are expected to drop by nearly 2% this year. This slowdown has come just two years after the country’s housing market went through a massive spring boom. During that time, prices in areas like Ontario and BC increased at a substantial rate. Now, it seems, experts have different views on what the future holds for housing sales in Canada.
Market Slowdown Expected
Since its boom a couple of years ago, the market has seen the introduction of foreign buyer taxes, an increase in interest rates and a change in mortgage rules. In particular, the federal government has added a stress test to mortgage applications. Now, as part of the process, buyers will need to prove they are financially able to handle interest rates that are higher than those indicated in their contracts. The rule applies to first-time home buyers, those who are renewing their mortgage and those looking to refinance.
Prior to the new rules coming into effect, Mortgage Professionals Canada wrote about the impact they expected the new mortgage rules would have on the marketplace:
“These changes are reducing mortgage competition and affordability for Canadian homeowners and would-be homeowners. We are concerned that, as the Bank of Canada noted, the introduction of the new rules will reduce growth in the Canadian economy, which will hurt the middle class.”
However, statistics show slow but steady activity in home sales across the county, with experts taking a wait and see approach with regards to the impact the taxes and new mortgage rules will have in the long run.
Positive Change on the Horizon
There are changes expected this year that have the potential to turn things around. Scotiabank economist Marc Desormeaux said that the situation may not be as bad as it appears. According to Maclean’s, he recently wrote:
“A number of major cities reported above-average snowfalls and below-average temperatures this year. We suspect that home buying will rebound in many centres in the coming months amid stable job creation and rising immigration.”
These predictions coupled with the newly announced First-Time Home Buyer Incentive may counteract the chilly winter market. The program offers credit of up to 10% for home buyers with an income under $120,000.
Some Markets Cool, Others Heat Up
While the details of the incentive initiative are yet to be announced, there is a $480,000 cap, which means that Vancouver real estate and Toronto real estate will be out of reach. Nevertheless, other city markets are heating up, including Calgary and Edmonton real estate.
The Realtors Association of Edmonton noted that unit sales were up from February, with single-family home sales increasing nearly 28%. Duplex/row-housing sales were up 21% and condo sales increased by over 8%.
In Calgary, the housing market has been stabilizing and sales have been improving, according to a report by CTV News. One of the reasons for the Calgary real estate market’s strength has been new interest from foreign buyers.