Real Estate in Canada – What Does 2019 Have in Store?

2017 served as a booming year for the real estate industry across the country, while 2018 proved to be a quieter year. The start of the latter year was characterized by declining sales and an overall deflation of the real estate market, especially in Toronto. Though the sales started to stabilize eventually, the figures were nowhere near the records of 2017 that made headlines.

The decline in the sales last year was not an indication of correction, rather it was simply the way people reacted to the new housing policies introduced by the OSFI on the 1st of January 2018. The steeply rising mortgage rates also played a prominent role in the declining of the real estate market. Although price forecasting is impossible, the shifts in the market in the past few years have forced potential buyers to survey the markets in order to ensure that they make a sensible investment.

Image source

The Year That Was – Real Estate in 2018

As per the real estate giants and the Canadian Real Estate Association, the sales volume reportedly went down by approximately 16 percent in 2018. Compared to 2017, the prices were also down by about 4.3 percent and the listings showed a decline of almost 13 percent. With a diminishing trend in the earlier months, the Toronto real estate market witnessed a slight upward movement in the month of April when prices went up by almost 5 percent, as compared to March.

The next few months saw a smooth flow before things started to again slow down by the time August arrived. The beginning of October marked the balancing of the markets as prices and sales began to drop steadily. Vancouver experienced the largest drop when prices went down by almost 2 percent in just a month, recording the largest drop in a decade.

Tracing the factors that brought about the sloppy trends, the gigantic decline (about 30 percent) in the residential land activity comes across as an integral one. Right next to this is the mortgage laws executed by the Office of the Superintendent of Financial Institutions (OSFI), that were to be effective from January 1. Many potential buyers felt the effect of the law on their purchasing power and chose to either delay or advance their purchases, creating a major drop in the purchase volume. To add to the agony, the Bank of Canada hiked the interest rates in January. Combined, these factors created a huge drop in the sales volume at the beginning of 2018.

Spring - the busiest time for the real estate industry saw a steady rise in both listings and prices. With the advent of the summer when the Bank of Canada further raised the interest rates, the sales started to dwindle again. Yet another increase in the interest rates in October paved the way for the declining sales in the last quarter.

Looking Forward – What 2019 Is Likely to Offer

The Canadian Economy is expected to stabilize with better trade relations with the U.S., owing to the signing of the United States-Mexico-Canada Agreement (USMCA). The big banks in the country believe that the interest rates will continue to hike between 2.25 and 2.75 percent by the end of the year. The new interest rates will demand the residents to utilize a larger part of their income towards debt and mortgage payments, leaving a lesser amount as disposable income, resulting in a prolonged slowdown.

Investment experts and real estate agents continue to remain positive about the growth of the Canadian economy in 2019, though the pace might be slower than in 2018. They believe that through a housing crisis in the country is not impossible, it is quite unlikely to unfold in the span of this year.

For Toronto, real estate agents believe that a massive correction is unforeseen since the supply of houses in the city remains limited. While a housing collapse is an unlikely scenario, potential buyers and sellers can expect the prices to become stagnant as the purchasing power of the buyers slowly rises.

With the haywire scenario, many potential buyers have sought to rent homes or get the office space toronto, waiting for their income levels to catch. Governments at all levels have also recognized the gravity of the scenario as owning a home is becoming exceedingly difficult. With the debt level high, the Canadian Government must be extremely cautious as any new reform undertaken by the Government might have an adverse effect, causing the prices to shoot up.

At this time, all that the buyers and sellers can do is to remain patient. As renting is a very cost-effective or affordable option, the sales volume is expected to go up sooner or later. Buyers too should be looking to invest in properties for a long-term motive, as the demand continues to rocket.

Keeping the dwindling trends and prices aside, there is still hope for the real estate sector in 2019. Though the volatility of the market cannot be eliminated, the risk of collapsing prices and sales seems to be lower than the previous year.

This article does not necessarily reflect the opinions of the editors or management of EconoTimes.