Don’t worry, Canada’s housing market isn’t on course for a crash, just don’t expect Canadian home prices to continue increasing at breakneck speeds, suggests a UK-based forecasting firm.
Oren Klachkin, a senior economist with Oxford Economics, says new mortgage rules “will cool but not crash” Canadian real estate this year. Ditto for expected higher interest rates and BC’s foreign-buyer tax applied to the Greater Vancouver Area.
Downward pressure from these factors will translate to national home prices climbing by a more-tempered 6 per cent this year, shy of the 10 per cent gains recorded in 2016, according a new research briefing authored by Klachkin.
The economist predicts that Greater Vancouver and the Greater Toronto Area, the two markets driving national prices, will show “some signs of success” this year despite the headwinds.
“We don’t see much downside after this as there are still plenty of factors supporting property prices in those two metropolitan areas,” he says in the briefing.
Relatively ebullient economies in Ontario and BC are encouraging Canadians to move to these provinces — especially given unemployment in oil-producing regions — pulling home prices higher as more people compete for limited listings, he says.
According to a BMO research note published this morning, net interprovincial migration to Ontario hit 12,000 in the third quarter of last year, the highest level in nearly three decades.
Meantime, builders in the GTA and Greater Vancouver haven’t kept up with strong demand in those markets, resulting in more upward pressure on prices, the briefing says. Local land-use policies are noted as a factor reining in residential construction.
Congestion resulting from “infrastructure deficiencies” plays a part, too, says Klachkin. Brutal commutes in the GTA and Greater Vancouver make people working in urban centres reluctant to search for housing further outside the cores.
“These constraints are unlikely to disappear in the near term, providing additional support for prices,” he writes.