Already the forecast wasn’t bright for the Canadian housing market.
At the end of last year, the Canadian Real Estate Association (CREA) was calling for home sales in 2019 to drop 0.5 percent while prices inched up a paltry 1.7 percent.
Then this week the association, which represents realtors across the country, downwardly revised its forecast, providing a grimmer outlook for sales activity and prices.
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Now CREA anticipates home sales will fall 1.6 percent, totalling 450,400 residential units and representing the lowest number since 2010.
“British Columbia is again expected to account for much of the projected decrease in national sales this year, along with a further expected decline in Alberta, but that should be offset by continuing strength in Quebec activity and a small gain in Ontario,” CREA states in the forecast release.
Meantime, the national average price is expected to hover around $487,000, down 0.2 percent. Declines are forecast for BC, Alberta, Saskatchewan and Newfoundland and Labrador, while Ontario, Quebec New Brunswick, Nova Scotia and PEI should see gains.
“While the outlook for economic growth has dimmed since CREA’s previous forecast was released last December, interest rates together with labour market and demographic fundamentals remain supportive for housing demand,” the association says.
Following a disappointing fourth quarter in terms of economic growth, the Bank of Canada maintained its policy rate, which influences the mortgage market, at 1.75 percent this month, suggesting it may be on the sidelines for some time.
“With further interest rate hikes this year having become less likely, the monthly trend for sales is generally expected to improve slowly from a starting point that has been lowered by tightened mortgage lending and provincial housing policies in recent years,” CREA continues.
Last January, federal policymakers introduced stress testing for uninsured mortgages that require borrowers to qualify for a rate 200 basis points higher than what their bank is offering.
Meant to discourage borrowers from taking on more debt than they can handle if rates rise, the move has been criticized by some in the real estate industry for creating a barrier to homeownership for Canadians who might have otherwise qualified for a mortgage.
But with Canadian consumer debt, including mortgages, reaching $1.9 trillion in the final quarter of 2018 after rising 4.6 percent annually, a cautious approach from policymakers has support as well.
“I still perceive it as a prudent thing to do to curb household indebtedness,” BC-based realtor Steve Saretsky said recently.