The Canadian Real Estate Association predicts home sales in Canada in 2019 are going to sink to a nine-year low in a forecast released this week.
“While economic and demographic fundamentals remain supportive for housing demand in many parts of the country, policy headwinds together with rising interest rates are limiting access to mortgage financing and negatively impacting homebuyer sentiment,” says CREA in a statement.
In January this year, the federal government changed mortgage rules to expand stress testing, the process of requiring a mortgage applicant to qualify at a higher interest rate than they are signing on for.
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As a result, even buyers who put down a 20-percent downpayment for an uninsured mortgage with a big bank would be required to qualify at a higher rate than before. While this led to a late-year increase in home sales in 2017, it meant many buyers this year had less purchasing power. The policy move came at a time when interest rates were already on the rise after a prolonged period of historically low ones.
As a result, CREA anticipates 456,000 homes will change hands in 2019, inching down 0.5 percent from this year’s anticipated total (458,200). Ontario home sales are expected to pick up slightly while Quebec displays continued strength, but more declines in BC and Alberta will counter these improvements, CREA says.
The association is calling for the average price of a Canadian home in 2019 to be $496,800, up 1.7 percent compared to 2018, a year in which CREA estimates prices will drop 4.2 percent on a year-over-year basis.
“The decline in the national average home price in 2018 has been mostly compositional, reflecting fewer sales in British Columbia and Ontario, Canada’s two most expensive provinces by a substantial margin,” CREA explains. Slumping prices in Alberta, Newfoundland, and Saskatchewan will weigh on the national average next year, while pricing in BC is projected to remain roughly flat.