After a screeching halt sometimes comes a crash. This was the year when Canada’s housing market hit the brakes. So what will happen in 2019?

Predicting housing prices is famously difficult. And forecasting housing meltdowns like the one that nearly brought down the global financial system in 2008 may be downright impossible. For now, though, the way experts cautiously paint the future for next year is closer to the picture of a landing plane than that of a rocket ship plummeting earthward.

The Canadian Real Estate Association (CREA) sees home sales rebounding a little (2.1 per cent) next year, with home prices roughly keeping up with inflation (2.7 per cent). In Ontario, prices will likely climb a little faster (3.3 per cent) and in British Columbia, a bit more slowly.

Quebec, New Brunswick, Nova Scotia and Prince Edward Island can also expect modest price gains, while Saskatchewan and Newfoundland and Labrador will experience a small dipping. The forecast for Alberta was stable prices, although that predated the recent oil price plunge.

The big banks expect interest rates to continue to rise to between 2.25 per cent and 2.75 per cent by the end of 2019. And that will keep turning the screws on Canadians’ budgets, with more money going toward mortgage and other debt payments and less left as disposable income. Climbing rates will also continue to raise the bar for wannabe homeowners who to pass the federal mortgage stress test in order to qualify for a new mortgage.

Though a housing crisis next year isn’t impossible, U.S.-based investment giant Vanguard says the risk of a housing crisis — which they define as a severe drop in housing prices in the span of a year that could trigger a recession — continues to be low.

Canada, along with Australia, stands out both for its sky-high housing prices and its gargantuan household debt levels. Home prices have grown by 24 per cent since 1999, compared to 18 per cent in Australia, 13 per cent in the U.S. and 12 per cent in the U.K. The amount that Canadian families owe, meanwhile, is as big as this country’s GDP, a level surpassed only in Australia, where household debt is now larger the size of the economy.

But Todd Schlanger, senior investment strategist at Vanguard Investments Canada, says the Canadian economy will likely continue to grow in 2019, albeit at a slower pace than in 2018.

In Toronto, John Pasalis, president of Realosophy Realty, sees prices staying relatively flat next year.

“I don’t see a massive correction,” he told Global News.

That’s in part because the supply of new homes remains limited in the city.

“If you look at the crashes that happened in the U.S. [subprime mortgage crisis] — in Miami, Phoenix, Las Vegas — those cities were overbuilt, and that’s not what’s happening in Toronto right now.”

Rather than a housing collapse, a more likely scenario is one in which home prices stagnate as household incomes slowly catch up, Pasalis added.

Another factor that might help keep the market stable is that rents are sky-high. This could help sustain the demand from homebuyers.

“At the end of the day, people need a place to live,” he said. And, especially in the downtown core, “it ‘s not like renting is an affordable option.”

In Vancouver, realtor Steve Saretsky sees a “full-blown buyer’s market” with prices that will continue to trend lower for detached homes, condos and townhomes alike.

His advice to buyers is to be patient.

“If you’re buying a home, plan to live there or hold it for the long term,” Saretsky, of Sutton West Coast Realty, told Global News.

Real estate investors shouldn’t count on price gains to make up for negative cash flow, he added.

Home sellers should be realistic.

When sellers fixate on “old peak prices,” they usually end up having to “chase the market down,” watching their asking price gradually fall, he said.

“If you are actually keen on selling, you have to be ahead of the market,” and possibly anticipate future price declines, he added.

In general, Pasalis says it’s important to understand different neighbourhoods. When Toronto home prices started to cool off in 2017, he says he warned clients about buying in areas that had seen high rates of activity by real estate investors. His advice: Don’t buy there or offer 20 per cent less than what homes were selling for a month earlier.

Pasalis correctly predicted that neighbourhoods that had seen some of the sharpest prices increases due to speculative bets would also experience the steepest price drops.

“In a volatile market, this can be the [difference] between making a safe real estate purchase versus seeing the value of your home fall by over $200,000 in a matter of months,” he wrote in a recent blog post.

The risk of price collapses driven by investor pullback is now lower, Pasalis told Global News.

Still, neighbourhood-level dynamics remain key, Saretsky said.

Source: Erica Alini, National Online Journalist, Money/Consumer  Global News

Will it crash? Here’s what to expect from the Canadian housing market in 2019

The British Columbia Real Estate Association estimates that economic growth will remain strong enough to support a boost in sales next year after a substantial decline in 2018, according to its latest forecast.

When the dust settles at the end of this year, association chief economist Cameron Muir expects sales recorded through the Multiple Listing Service will have fallen 23 per cent to 80,000 transactions, compared with 103,768 in 2017.

“However, continuing strong performance in the economy combined with favourable demographics is expected to push home sales above their 10-year average in 2019,” Muir said Thursday in releasing the forecast.

Province wide, Muir’s forecast is for sales to rise 12 per cent to almost 90,000 units, but with a record number of new homes under construction and high levels of inventory, home prices will be more in keeping with inflation.

In Metro Vancouver, that is likely to mean sales in the region covered by the Real Estate Board of Greater Vancouver bouncing back to 31,400 transactions in 2019 and average prices edging up 2.9 per cent to almost $1.1 million.

In a still changing market, Muir’s forecast is slightly more optimistic than the Canada Mortgage and Housing Association forecast released earlier this week.

“Overall, we anticipate MLS sales to trough in 2018 and see some recovery in 2019 (and 2020),” according to the CMHC forecast, “while average prices will see a relatively flat growth profile with some risk of decline as demand and supply find a new balance.”

In the Lower Mainland regions as defined by the Fraser Valley and Greater Vancouver real estate boards, the CMHC forecast estimates that while economic conditions are still favourable, slowing population and employment growth have cut into housing demand.

The region covered by the CMHC’s forecast takes in submarkets of both the Real Estate Board of Greater Vancouver and Fraser Valley board and in its estimation, the area will likely see higher sales, but faces the likelihood that prices will decline further.

“This reality, when combined with housing policy changes from all levels of government, has resulted in an evolution of short-to-medium-term home price expectations,” according to the forecast, “compared with where they were one to two years ago.”

Source: Derrick Penner, Postmedia

https://vancouversun.com/news/local-news/real-estate-forecast-anticipates-2019-sales-to-edge-up-after-2018s-fall

In some ways it would be easier to plan if we really knew for sure whether Canadian home prices were about to fall off a cliff as so many people keep predicting.

Real estate experts in British Columbia predict residential home sales will dip this year but remain well above the province’s 10-year average, although they warn rising interest rates could leave some B.C. households “vulnerable.”

The British Columbia Real Estate Association has released its 2018 first quarter housing forecast, showing residential sales are expected to fall 8.6 per cent to 94,855 units this year, with the decline continuing into 2019.

The projected skid follows the 7.5 per cent decrease recorded last year but the association says residential sales in B.C. are still well above the 10-year average of 84,800 units.

Strong employment growth, consumer confidence and more workers moving to B.C. are credited for the booming housing market over the last four years, including 2016, when a record 112,209 homes changed hands.

But the association predicts the pace of sales will cool due to several factors, including a five-year qualifying rate for a mortgage that is forecast to reach 5.70 per cent by the fourth quarter of 2019.

Chief economist Cameron Muir predicts higher interest rates, coupled with slower economic growth, will carry the moderating trend in home sales right through next year.

“More stringent mortgage qualifications and rising interest rates will further erode affordability and household purchasing power,” Muir says in a news release.

The association also notes the supply of homes for sale continues at, or near, decade lows in most B.C. regions but it says 60,000 new homes are now under construction, well above the 2008 high of 45,000 units.

“Slowing consumer demand combined with a surge in new home completions over the next several quarters will create more balance in the housing market and produce less upward pressure on home prices,” the association says in its release.

It estimates the average price for a home in B.C. is forecast to increase 6.0 per cent to $752,000 this year, and a further 4.0 per cent to $781,800 in 2019.

Source: The Canadian Press

http://www.timescolonist.com/b-c-home-sales-to-fall-as-interest-rates-rise-but-prices-stay-strong-bcrea-1.23196598

The “Big Six” Canadian banks have now all hiked mortgage rates ahead of a Bank of Canada policy announcement on Wednesday.

Canadian Imperial Bank of Commerce, Royal Bank of Canada and Toronto-Dominion Bank raised mortgage rates last week, citing “recent activity by competitors” and “Bank of Canada rate changes” as some of the factors that go into an increase.

Bank of Nova Scotia has now hiked as well, increasing its posted five-year fixed-rate mortgage rate to 5.14 per cent from 4.99 per cent. The lender also boosted its one-year, two-year, three-year, four-year, seven-year, and 10-year fixed-rate mortgages by 20 basis points.

“Our number one focus is providing value for our customers — we manage our pricing very actively to do just that,” said Scotiabank spokesman Lukas Gerber on Monday in an email. “We use a variety of market benchmarks to set rates.”

Bank of Montreal has likewise lifted rates, raising its posted five-year, fixed-rate mortgage to 5.14 per cent from 4.99 per cent, as well as hiking its posted four-year fixed-rate 55 basis points  to 4.79 per cent, among other adjustments.

National Bank Financial analyst Gabriel Dechaine said last week in a note on the banks that approximately 80 per cent of outstanding mortgage debt is made up of fixed-rate loans, “of which we believe the majority has five-year terms.”

Montreal-based National Bank of Canada, the sixth-largest bank in the country, has also increased its posted five-year fixed rate mortgage by 15 basis points to 5.14 per cent and bumped its four-year fixed loan to 4.59 per cent from 3.89 per cent.

Laurentian Bank of Canada’s five-year fixed mortgage is also up  15 basis points to 5.14 per cent.

“These changes reflect an increase in the cost of funds and are in line with the rates offered by the market,” said Laurentian spokesperson Benjamin Cerantola in an email.

The Bank of Canada is set to make its next policy announcement on Wednesday, with the potential for an interest rate hike having increased in recent weeks thanks to strong economic data. Another rate hike could provide a boost to bank margins, according to National Bank Financial’s Dechaine.

“2017 provided not only surprise rate increases from the Bank of Canada, but a steady increase in the key five-year benchmark bond yield,” he wrote. “Both trends have contributed to an early turnaround in the trend of shrinking bank margins.”

Source: Geoff Zochodne, Financial Post/Postmedia

http://business.financialpost.com/real-estate/mortgages/big-six-have-now-all-raised-mortgage-rates-as-bank-of-canada-decision-looms

If your New Year’s dreams include buying a home in B.C., don’t expect it to get much easier in 2018, according to one expert.

“The best guess for where prices are going to be a year from now is about where they are today,” said Tom Davidoff, associate professor at the University of B.C.’s Sauder School of Business

Davidoff says there are some changes coming that could slow things down — stricter mortgage regulations that take effect  Jan. 1, for one — but overall he predicts prices will keep climbing.

“Fifty years from now, I would be very surprised if Vancouver is anything other than an extremely, extremely difficult place to buy or to rent,” he said.

“You have to think supply is pretty constrained by geography. We can build more condos, but it’s hard to add land. We’re hemmed in by oceans and mountains and those are beautiful oceans and mountains, and rich people all over the world keep getting richer and a lot of them want to come to Canada.”

In the short run, though, Davidoff says there could be a some relief.

“There’s a lot of construction going on,” he said.

“Some people believe it’s international flippers buying these condos. They may not want to hold them once the building’s complete. If we see the flippers actually flip these new units before they’re completed, as they start to come online, that could create lower prices and lower rents as people move in.”

He argues that communities around the Lower Mainland need to maintain such construction in a variety of neighbourhoods.

“Adding more townhomes and apartments in neighbourhoods where there’s single family homes would really help in coming years,” he said.

He’d also like to see the province make more of an effort on tax reform.

​Although housing affordability was a key election issue, Premier John Horgan has admitted his new government hasn’t made much movement on this — yet.

But Horgan is promising there will be progress with the government’s budget in February.

Davidoff says the way people are taxed in B.C. needs to change if we want to become a more affordable place to live.

Property taxes are going up in Vancouver in 2018, but Davidoff says they’re still much too low.

“Our property tax rate is something like four-tenths, maybe three-tenths of a per cent in the City of Vancouver. It would not be uncommon to see one-and-a-half or even two per cent in other big North American cities,” he said.

Davidoff would like to see that reversed.

“Send the message — we want you to live and work here. So we’re going to have high property taxes, low income and sales taxes. Hopefully the NDP moves in that direction,” he said.

For any younger people considering trying to buy into the Vancouver market, Davidoff warns spending everything you have on a down payment for a highly leveraged asset is risky, but not crazy — especially if you’re very attached to the city.

“In the long run it’ll probably work out, it might even be a great idea in the short run, but there’s certainly a possibility that you’re going to feel very stupid if prices fall 20 per cent right after you’ve bought,” he said.

Still, he says, if you feel like your job prospects or quality of life might be better elsewhere, packing up might be the way to go.

“The option to leave is really an important option.”

Source: Stephanie Mercier, CBC News

http://www.cbc.ca/news/canada/british-columbia/hoping-to-buy-a-home-in-b-c-sorry-it-s-not-likely-to-get-much-cheaper-1.4457160

Despite efforts by government and regulators to curb Metro Vancouver’s hot housing market, new home prices have continued to climb in the past year.

Recently released data from Statistics Canada shows the overall price of brand new houses and townhomes in the region has soared 6.2 per cent in the 12 months since June 2016.

“Last time [the new house price index] grew larger than 6.2 per cent was in June of 2010,” said analyst Rohit Verma, adding prices rose 6.7 per cent.

The agency has numbers dating back to 1981.

Verma says the information is gathered through a monthly survey of home builders and their contractors, excluding new condominiums.

Across the country in the month of June, Metro Vancouver saw the greatest gain at 1.5 per cent overall. Ottawa-Gatineau, Ont. followed at 0.9 per cent.

Verma says the main reason cited for the increase was “improving market conditions.”

It’s more evidence of the resiliency of the region’s real estate market, despite government efforts at all levels to temper prices.

Last August, the previous Liberal government introduced a 15 per cent tax on foreign home buyers in Metro Vancouver.

Two months later, mortgage rules were tightened across Canada.

Home buyers applying for mortgages with less than a 20 per cent downpayment had to undergo a “stress test” to determine if they could afford to pay back a loan if interest rates rose.

And rates did rise.

Last month, the Bank of Canada raised its key interest rate by 0.25 percentage points — the first time it had increased it since 2010.

All of that hasn’t stopped the market from climbing or put affordable homes within the reach of most people.

Sales in July were 0.7 per cent above the 10-year sales average for the month, according to the BC. Real Estate Association.

The Multiple Listing Service Home Price Index composite benchmark price for all residential properties in Metro Vancouver is $1,019,400 — an 8.7 per cent increase compared to July 2016.

Source: Lien Yeung, CBC News

http://www.cbc.ca/news/canada/british-columbia/increase-in-new-home-prices-reaches-7-year-high-in-metro-vancouver-1.4244437

Housing price appreciation across the country will be more than it has been in the last 16 years, according to a new forecast from one of the country’s largest real estate companies.

Royal LePage, in a report out Wednesday, says economic uncertainty around the globe and low interest rates continue to fuel the Canadian existing-home market, adding that prices will rise by 12.4 per cent in 2016 from 2015 to an average of $563,000.

The real estate company predicts greater Vancouver will lead the way with prices rising 27 per cent this year to an average of $1.206 million, while greater Toronto prices will rise 14.9 per cent to and average of $718,000 during the period.

LePage says its previous forecasts didn’t account for an extended period of low mortgage rates which continue to fuel the housing market. Ratesupermarket.ca says the best fixed rate on a five-year mortgage is now 2.18 per cent, close to a record low.

“Our forecasting models, which pointed to a slowing housing market as the year progressed, included a modest increase in the cost of borrowing,” said Phil Soper, chief executive of LePage. “Economic and social disruptions have rocked the world once again, introducing new risks and making it very likely that the Bank of Canada will leave interest rates as-is for now. Few industries are as rate sensitive as real estate. We don’t see even a mild correction for either the Toronto or pistol-hot Vancouver markets in 2016.”

Despite citing the Brexit vote as increasing uncertainty in the market, LePage says foreign money tied to Europe will flow into Canadian commercial real estate as opposed to the residential market.

LePage’s own internal surveys do say foreign markets are impacting Toronto and Vancouver real estate, but the money is coming from beyond the European Union.

Its surveys of agents in the second quarter found 71 per cent in the GTA and 74 per cent in Greater Vancouver reported an increase in activity from foreign investors who were defined as having lived outside Canada for the last six months. LePage said 35 per cent of agents in the GTA and 37 per cent in Greater Vancouver believe foreign ownership accounts for less than 10 per cent of sales.

Government continues to consider measures to deal with the impact of foreign owners and the federal finance minister has promised to create a working group of provincial and municipal counterparts to consider the issue in Toronto and Vancouver. On Monday, British Columbia agreed to grant Vancouver the right to tax owners of vacant property — a move seen as being at least partially aimed at foreign investors.

Soper cautioned against government getting too involved in the housing market.

“We remain convinced that heavy-handed use of tax policy in an effort to artificially influence asset values in an open-market economy like ours is fraught with peril, particularly in a cyclical industry like housing.”

Still, he left no doubt his industry has some concerns about the fast-paced nature of the market and some of the impact it has on prices. Soper even issued a warning to speculators.

“At Royal LePage, we see residential real estate as a long-term investment supporting family life. A home is ill-suited as a buy-and-flip investment. People that engage in this kind of activity are inevitably burned when a market slows and the time it takes to sell the property increases substantially,” he said.

Source: Garry Marr, Financial Post
http://business.financialpost.com/personal-finance/mortgages-real-estate/canadian-real-estate-prices-to-see-largest-annual-increase-this-century-forecast-says

Home sales in Greater Vancouver are on a hot streak, and the professional association representing all the real estate boards in the province is bumping up its forecast for 2016, predicting escalating prices and a jump in the number of homes sold.

The British Columbia Real Estate Association forecasts unit sales in the Greater Vancouver region will increase 8.9% in 2016, from 43,145 homes sold in 2015 to 47,000 this year.

For B.C. as a whole, unit sales are forecast to increase 12.3% to 115,200 units, breaking the previous record of 106,310 units sold in 2005.

“Robust employment growth and a marked increase in migration from other provinces is buoying consumer confidence and housing demand in most regions of the province,” said BCREA chief economist Cameron Muir.

“Record housing demand has depleted inventories in many urban areas, and the resulting imbalance between supply and demand has pushed home prices considerably higher.”

The average sales price for homes in Greater Vancouver is expected to reach $1.125 million this year, up 24.6% from $902,801 in 2015. Across the province, the average price is forecast to increase 20.4% this year, from $636,600 last year to $766,600 in 2016.

This latest forecast is in sharp contrast to the BCREA’s previous release, in which it had predicted an 8.2% drop in unit sales across Greater Vancouver and a 6.2% decline across the province as a whole.

The BCREA had previously said home sales would fall because of a lack of supply. It now says a jump in new home construction is set to help meet demand.

“Waning inventories of newly completed and unoccupied units are being offset by a market increase in the number of homes under construction,” the BCREA said in a news release.

“Total housing starts in the province are forecast to climb 20% to 37,800 units this year, before edging back to 34,200 units in 2017.”

Source: Emma Crawford Hampel, Business in Vancouver
https://www.biv.com/article/2016/6/greater-vancouver-home-sales-and-prices-soar-2016-/

Real estate prices in key global cities are rising at a slow, moderate pace, particularly in Europe.

According to new research published by international real estate consultant Knight Frank, 35 of the world’s most important cities saw an average price increase of 3.6% in the year to March 2016.

“Since 2014 the index has consistently seen annual growth of 3-4%, with no city recording double-digit annual price declines since the second quarter of 2015,” notes Kate Everett-Allen of Knight Frank, who carried out the study.

However, Everett-Allen found some notable differences both between regions and within them. In North America, for example, New York, Miami and Los Angeles grew by 2.3%, 3.8% and 5.1% respectively but Vancouver saw a spectacular 26% rise in real estate prices — despite a 1% increase in land transfer tax on purchases above CAD2M.

Australasia was more homogeneous, with both Sydney and Melbourne posting a 12% rise. The two African hubs were also in positive territory, albeit with some difference between the two—Cape Town went up 6.9% and Nairobi up 3.3%. Asia was rather more of a mixed bill, with excellent growth in Shanghai (to the tune of 20%) but sizeable drops in Hong Kong and Taipei (down 6.4% and 7.6% respectively.

In Europe, real estate growth was modest and fairly consistent across the majority of cities, with prices either remaining flat or recording small rises of less than 3%. Only Moscow, Paris, Milan and Monaco bucked the trend. The first three saw dips (of 5.9%, 2.7% and 1.2% respectively) while Monaco recorded a 4.9% rise.

However, says Everett-Allen, some of these numbers need to be analysed in the context of past performance. Prices in London, for example, only grew by 0.8% in the year to March, the lowest figure since October 2009
 — but the British capital had experienced a period of exceptional growth in earlier years so a slowdown was natural.

Interestingly, the Knight Frank study also showed that, across the world, the impact of new transparency rules, new taxes or fees for foreign buyers—all of which are seeing a surge in global hubs—varies hugely depending on the pre-existing fundamentals and market cycles.

Thus, the land transfer tax rise had no depressive effect in Vancouver, nor did new transparency rules for cash buyers affect the New York and Miami markets. In London, by contrast, a series of changes to stamp duty land tax and to purchases by non-domiciled residents, have amplified the market cycle and helped slow down price growth.

Source: Carla Passino, Forbes http://www.forbes.com/sites/carlapassino/2016/05/19/slow-and-steady-real-estate-growth-in-world-cities-is-an-exercise-in-moderation/#108e2b7349c6