2018 was hardly smooth sailing for the Canadian housing market. Sales and prices plunged in January, as the market struggled to adjust to stricter mortgage rules. Now, after a summer of slowly warming activity, things are cooling off again.
National home sales fell 1.6 percent last month, in what some industry experts are saying could be a sign of a bumpy 2019.
“Sales fell for the second straight month in October, signaling that the post [mortgage stress test] bounce in activity observed from May to August has run its course,” wrote TD economist Rishi Sondhi, in his latest note. “Rising borrowing costs are restraining activity,” he continued.
Of course, different markets will face their own unique challenges in the new year. Read on for a closer look at what could be in store for Canada’s biggest housing markets.
A balanced year for the GTA
Most economists agree that the GTA has a strong enough level of buyer demand to support at least marginal growth in home prices and sales in 2019. But marginal is the key word here, as rising interest rates eat into buyers’ budgets.
The Bank of Canada hiked the overnight rate to 1.75 percent in October, and is widely expected to do so again in the new year. According to Scotiabank economist Marc Desormeaux, that should mean that prices stabilize in 2019.
“We saw prices rise by roughly 1 percent last month, and sales drop 1.1 percent last month,” Desormeaux tells Livabl. “What that means is that things are balanced for now, but we’re going to continue to monitor the situation heading into 2019.”
He adds that it’s likely that more affordable property types, such as condos, will perform better, while the low-rise market continues to see lacklustre sales activity.
Vancouver will struggle under stress test
While the Toronto market has largely adjusted to the effects of new mortgage rules, the Vancouver market still has a ways to go, according to the latest forecast from the British Columbia Real Estate Association (BCREA).
“The erosion of affordability and loss of purchasing power induced by the stress test, as well as by moderately rising interest rates, are expected to temper housing demand through 2019,” reads the report.
The association is predicting that prices will grow slowly over the year, in line with inflation, with relatively low levels of supply keeping the market from cooling too drastically.
One potentially worrying sign? There were 12,984 active listings in the Greater Vancouver Area last month, the highest level in four years. While the extra supply is likely a relief to cash-strapped homebuyers, it’s a sign that the market is struggling under the current higher interest rate environment.
“While slower housing demand is reminiscent of 2012 when maximum amortizations were reduced to 25 years, active listings are still a fraction of their level at the time,” writes BCREA.
Prices are cooling in Ottawa
The Ottawa housing market had a banner 2018, with month after month of activity gains. But it seems like the party might be over, heading into 2019.
Prices were up last month, but at a slower pace than what was seen in the first half of the year. Home prices rose 7 percent to $431,300 in October, marking the sixth straight month of slowing price growth.
“Ottawa’s reputation as one of the most affordable cities in the country endures,” wrote Ottawa Real Estate Board President, Ralph Shaw, in a recent statement.
Shaw tells Livabl that, while higher interest rates will likely slow price growth in 2019, the market is well positioned to maintain its relatively strong performance.
“We saw listings drop drastically last month, and I believe that lack of supply should keep prices from dropping too much in the new year,” he says.