Photo: James Bombales
Few could have predicted the roller coaster that was the Canadian housing market in 2017.
Following a red hot first quarter with record home prices in Toronto and the GTA, the introduction of Ontario’s Fair Housing Plan in April saw sales and prices plummet over the summer. Now, as we head into 2018, the market seems to be balancing out. But how does all of this compare to what economists were predicting at this time last year?
Here are 6 predictions for 2017 that ended up falling seriously short.
1. The prediction: The Bank of Canada will cut interest rates by 0.25 per cent
Capital Economics senior Canadian economist David Madani predicted that the Bank of Canada would cut interests rates by 0.25 per cent, from an already historic low of 0.50 per cent, following a more pronounced downturn in housing activity.
The reality: The overnight rate has been hiked by 50 basis points
Following extremely strong GDP growth in the first two quarters of the year, the Bank of Canada hiked the overnight rate by 50 basis points, first in July and then in September. Economists are predicting a third rate hike in the spring of 2018.
2. The prediction: The average sale price of a Canadian home will fall to $475,900
Last December, CREA predicted that the average sale price of a Canadian home would fall 2.8 per cent to $475,900, following a 10.5 per cent increase to $489,500 in 2016.
The reality: Average price forecasted to rise to $506,700
As of Q3, CREA is forecasting the national average price to rise by 3.4 per cent to $506,700 in 2017.
3. The prediction: Vancouver’s housing market will continue to cool
In January, BMO Senior Economist Sal Guatieri predicted that Vancouver’s home prices would continue to fall in 2017, following the introduction of a foreign buyer tax in the summer of 2016.
The reality: Prices are making their way back up
Prices dropped after the introduction of the foreign buyer tax, but these days appear to be making their way upwards. CREA forecasts that the average home price in BC will have grown by 2.2 per cent in 2017.
4. The prediction: Canadian home sales will fall by 11.5 per cent
RBC predicted that home sales would fall 11.5 per cent to 467,100 in 2017, after rising 4.4 per cent to 527,900 in 2016.
The reality: A decline of 5.3 per cent
This one was way off base — CREA is forecasting a decline of only 5.3 per cent to 506,900 units. “The decline stems almost entirely from the revision to the forecast Ontario home sales,” reads CREA’s report. “Sales in Ontario are now projected to decline by 10 per cent in 2017 compared to all-time records set in 2016.”
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5. The prediction: The aggregate price of a Canadian home will rise 2.8 per cent annually
Royal LePage forecasted that the aggregate price of a Canadian home — which rose 13 per cent annually in 2016 — would only rise 2.8 per cent annually in 2017.
The reality: A rise of 3.4 per cent.
As of Q3, CREA is forecasting that the national average price will rise by 3.4 per cent to $506,700 in 2017. Ontario is predicted to see a sizeable year-over-year gain of 8.7 per cent.
6. The prediction: The economy will grow by 2.5 per cent
Last December, the BMO Canadian Financial Conditions Index predicted that the Canadian economy would grow by 2.5 per cent in 2017, an improvement from 2016’s “subpart” 1.3 per cent growth.
The reality: A forecasted 3.1 per cent growth
Most banks are now forecasting that by the end of 2017 Canada’s economy will have grown by 3.1 per cent, following a growth of 3.7 per cent in Q1 and a whopping 4.5 per cent in Q2. “The Canadian economic sizzle has yet to fizzle,” writes TD Senior Economist Brian DePratto. “We anticipate continued above-trend growth to yield an impressive 3.1 per cent expansion for 2017, the best performance since 2011.”