Photo: James Bombales

The first quarter of 2017 was a dark time for would-be GTA homebuyers. Prices were reaching unheard of heights, causing many to question if they could afford to own in the area at all.

But 2018 might finally be the right time to buy, according to Hilliard Macbeth.

“For those few people who have waited for house bargains, 2018 could be the year,” he writes in a recent note. “Patience will finally be rewarded.”

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That’s if all of his predictions for the year come true, that is. Like many industry watchers, MacBeth thinks interest rates and mortgage rates will be on the rise over the course of the year.

“The Bank of Canada increased interest rates twice in 2017 and markets are expecting…more in 2018,” he writes. (Indeed, the Bank hiked the overnight rate to 1.25 per cent this month.) “Obviously higher rates would be a serious headwind for housing,” notes MacBeth.

He’s also predicting a decrease in consumer spending, after a solid 2017. Core retail sales rose from $25 billion in 2009 to $34 billion in 2017.

“Higher house prices allowed people to refinance mortgages, increase their lines of credit for renovations and buy second (and even third) homes,’ he writes.

MacBeth writes that if Canadians decide to start paying that debt in 2018, retail sales will be hit hard and house prices will correct further.

And the final factor in a cooler housing market in 2018? A plunging Canadian dollar, bringing with it falling housing prices.

“If the Bank of Canada tries to keep interest rates low enough to mitigate the worst aspects of a weak housing market the dollar could test the 65 cent level,” writes MacBeth. “A very weak dollar would push inflation higher which leads the Bank of Canada to raise interest rates. Higher interest rates mean that even fewer people will qualify for mortgage loans, weakening the housing market even further and creating a negative feedback loop.”

The darkest of MacBeth predictions? That the real deals will come after foreclosures begin to become more common.

“The best deals won’t appear until many people are forced to sell their properties,” he writes. “Lenders usually get the power to sell through foreclosure, so watch what the banks and other lenders do.”

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