Photo: James Bombales
August saw housing markets across Canada post year-over-year home prices gains, in what many are calling the end of a policy-induced cooling period. But will the jump in activity carry on into the fall? One economist says yes.
“It’s official: the Toronto benchmark price is no longer falling on a year-over-year basis. It returned to positive territory in August — more or less on cue — marking an end to a correction that lasted five months,” writes RBC senior economist Robert Hogue, in a recent note.
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Those hoping that the Ontario government’s Fair Housing Plan and new mortgage rules would put a damper on housing activity are going to be disappointed, writes Hogue, who notes that sales have also been on the rise these past few months.
“Greater Toronto Area resales jumped 22 per cent cumulatively in June and July (on a seasonally-adjusted basis) from decade-low levels,” he writes. “Activity rose further month-over-month in August though the pace moderated significantly to just 2 per cent.”
But while Hogue predicts that prices will continue to rise, he’s quick to note that they will likely do so at a modest pace, avoiding the frenzy of last spring’s red-hot market.
“[Our] view [is] that rising interest rates, the stress test and affordability issues will drain away the market’s momentum in the period ahead,” he writes. “We think that low single-digit (year-over-year) increases will be the norm for a while. We see little that would disrupt the current balance between demand and supply in the market.”
And it’s not just the GTA that can expect single-digit year-over-year increases. Hogue points out that the Greater Vancouver Area’s benchmark price was up 4.1 per cent year-over-year in August, the slowest rate of growth in more than four years.
“The market continues to be under heavy pressure at this point as it wrestles with recently implemented provincial measures designed to cool things down as well as higher interest rates, the stress test and severe affordability issues,” he writes. “Home resales definitely were soft again in August — they were 25 per cent below the 10-year average for the month.”