Photo: James Bombales
The Canadian housing market continued to warm up in August, as national home sales climbed 0.9 per cent month-over-month.
The modest growth reflects a market which has largely adjusted to the effects of a new mortgage stress test, but still faces the headwind of rising interest rates, according to a new report from the Canadian Real Estate Association (CREA).
“Economic and demographic fundamentals remain supportive for housing demand in many parts of the country; however, policy headwinds have impacted homebuyer sentiment and access to mortgage financing in many housing markets,” reads the report. “Further expected interest rate increases…are expected to continue to keep home sales activity in check over the rest of the year and into 2019.”
The report notes that additional interest rate increases expected this year and in 2019 will “continue to raise the bar that borrowers must clear to qualify for mortgage financing.” The Bank of Canada hiked the overnight rate to 1.50 per cent in July, and is widely expected to do so again in October.
“I think, when you look at the August sales numbers, we’re seeing the market react to a series of policy changes,” Royal LePage Signature Realty sales representative Cam Woolfrey tells Livabl. “The fall market is here, which traditionally brings higher prices and more activity, but higher interest rates are going to keep some people on the sidelines.”
National sales could decline by 9.8 per cent in 2018, according to the CREA report, while the national average price is projected to ease to $494,900, down 2.8 per cent year-over-year.
“When you starting looking at 10-year averages, I think prices are heading in a more healthy direction, as opposed to the large peaks and deep valleys we’ve seen over the last year or so,” says Woolfrey. “In markets like Toronto, where there’s still strong demand, prices will continue to move upwards, but at a more moderate pace.”