Photo: James Bombales
At the end of every year, economists release their forecasts about what the coming 12 months might have in store for the Canadian housing market.
While the broad strokes of their predictions often come to pass — they are experts, after all — there are always a few that end up falling flat.
With this in mind, Livabl has collected some of the (educated) guesses that missed the mark in 2018.
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The prediction: GDP growth will slow slightly due to cooling housing markets
Desjardins’ team of economists released a forecast in December of 2017, predicting that a slowdown in residential investment would eat into Canada’s GDP growth — but not by too much.
“We can expect residential investment to slow down next year,” reads the report. “Ontario could lose one of its main growth drivers of recent years. In these circumstances, Ontario’s real GDP would increase by 2.3 per cent in 2018.”
The team predicted that national GDP growth would slow to 2.3 percent in 2018, followed by a 2.1 percent increase in 2019.
The reality: Try a lot
The slower housing market did take a bite out of the Canadian economy in 2018 — but it wasn’t a small one. While it’s still too early to call, Capital Economics’ chief North American economist Paul Ashworth is currently predicting GDP growth of 1.7 percent in 2018.
“We expect economic growth to slow to 1.7 percent this year and only 1.3 percent in 2019, as the housing downturn continues to weigh on consumption and residential investment,” Ashworth wrote in his latest analysis.
The prediction: Toronto’s housing market will struggle
In December 2017, TD senior economists Michael Dolega and Rishi Sondhi predicted that the Toronto housing market would have a lacklustre year, as it struggled to adjust to the effects of stricter mortgage qualification rules, which were set to come into effect in January 2018.
“Going forward, the improvement in Ontario’s market could take a breather, with the initiation of [new mortgage rules] likely to weigh on activity in the GTA,” they wrote.
The reality: It’s been warming for months
After serious dips in sales and prices during the first half of the year, the GTA market has seemed to largely adjust to the effects of the mortgage stress test. In October, sales were up 6 percent year-over-year.
“Annual sales growth has been positive since the late spring. While the [new mortgage stress test] and higher borrowing costs have kept sales below 2016’s record pace, many households in the Greater Toronto Area remain upbeat on home ownership as a quality long-term investment,” wrote Jason Mercer, senior market analysis manager of the Toronto Real Estate Board, last month.
Meanwhile, the aggregate price of a home in the GTA rose 1.3 percent in Q3 of 2018, according to data from Royal LePage.
“Our expectation is that strong population growth in the GTA will fuel a continued rise in prices,” Phil Soper, president and CEO of Royal LePage, told Livabl. “New households are forming, and that’s putting pressure on the existing housing stock.”
The prediction: Quebec housing is a low risk for overheating
Heading into 2018, Canada Mortgage and Housing Corporation (CMHC) chief economist Bob Dugan predicted that key markets like Toronto and Vancouver were still at risk of over valuation, while Quebec would likely have a relatively quiet year.
“House prices in Calgary, Edmonton, Saskatoon and Regina appear broadly in line with fundamentals, but strong evidence of overbuilding is still observable,” reads the report from the CMHC. “[Meanwhile,] Manitoba, Quebec and Atlantic Canada housing markets were rated as showing low vulnerability.”
The reality: Montreal is burning up
If there was a dark horse in Canadian real estate in 2018, it was Montreal. The city has been posting month-over-month sales and prices gains for months, with CMHC now warning that it could be at risk of overheating.
“Montreal’s resale market is close to overheating, creating significant upward pressure on prices as a result of a sharp tightening between supply and demand,” reads the latest CMHC release.
Listings in the city fell 17 percent year-over-year in October, while a lack of supply pushed the median price of a condo up 4 percent year-over-year to $265,000.
“[The condo market] has moved from a buyer’s market to a seller’s market in just one year,” wrote Nathalie Begin, president of the Greater Montreal Real Estate Board board of directors, in a recent report.