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.

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

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

The insanity, it seems, is not over.

Despite ongoing warnings from the CMHC that the Vancouver housing prices are overvalued and have outpaced the economic fundamentals in the city, they keep climbing.

In the past year, the benchmark price for a detached home in the region — not just the City of Vancouver itself — has climbed 30.1 per cent, to $1.4-million, according to new numbers from the Real Estate Board of Greater Vancouver.

The “benchmark” price is a measure used by the board to describe what it calls a “typical property” in the market, taking into account bedrooms, lot size, and other factors, and is not an average or median price.

To put that in context, the median family income in the Vancouver metropolitan area is $73,390 — lower than the Canadian average, according to the latest census numbers available.

The highest benchmark price for a detached home is still Vancouver’s west side, at $3.2-million, which is up 172 per cent over ten years, and 28.4 per cent in the past year.

But the largest increases in house prices in the past year are outside Vancouver:

Tsawwassen up 41 per cent to $1.16-million.
Richmond up 36.5 per cent to $1.5-million.
Ladner up 35 per cent to $971,500.

Apartment and townhouse listings went up 20.6 and 22.1 per cent, respectively, in the past year in Greater Vancouver.

The Real Estate Board of Greater Vancouver covers Vancouver, Burnaby, New Westminster, Richmond, Port Moody, Port Coquitlam, Coquitlam, North Vancouver, West Vancouver, Squamish, Whistler, Sunshine Coast, Pitt Meadows, Maple Ridge, and South Delta.

The benchmark detached home price in the Fraser Valley also rose 30 per cent over the last year, to $776,500, according to the Fraser Valley Real Estate Board.

That area includes Surrey, White Rock, Langley, North Delta, Abbotsford and Mission.

The price increases are, not surprisingly, driven by a strong demand with not much supply.

There was a slight increase in residential listings last month, but not enough to keep up, said Greater Vancouver Real Estate Board president Dan Morrison in a release.

“While we’re seeing more homes listed for sale in recent months, supply is still chasing this unprecedented surge of demand in our marketplace,” he said.

In April 2016, sales of all properties (not just detached homes) in Metro Vancouver were 41.7 per cent above the 10-year sales average for the month.

Meanwhile, the total number of properties currently listed in Metro Vancouver is down 38.3 per cent from last year.

That means the sales-to-active listings ratio — a measure analysts use take the temperature of a market — was 63 per cent in April 2016, the sign of a seller’s market.

Home prices tend to experience upward pressure when that ratio is just 20 or 22 per cent, according to the board.

Source: CBC News http://www.cbc.ca/news/canada/british-columbia/vancouver-real-estate-house-prices-1.3564528

In a red-hot real estate market where inventory is low, prices are high and competition is fierce, the seller holds exponentially much more power than the buyer.

Multiple offers have become the new normal in the Vancouver market, with many properties selling for hundreds of thousands of dollars over the asking price.

Those bidding wars have buyers going to extraordinary lengths just to get a chance at getting into a market that’s really out of control.

CTV Vancouver has compiled a list of expert tips to help you get the property you want, if you’re faced with a multiple offer situation.

1. Unconditional offer

Gone are the days where offers can be subject to financing, inspection or lengthy waiting periods. The key to winning a bid now is going in with zero conditions attached. That means having your financing in place well ahead of even going to see properties. It can also mean having a bank draft deposit in hand to present to the realtor and homeowners.

Realtor Gary Serra says it can also help to make sure that deposit is bigger than your competitor’s.

“I think in some cases people are coming in with a higher deposit because, again, if you want to stand out compared to other offers – obviously people will notice that,” he told CTV Vancouver.

2. Do your home inspection early

It used to be that you could include a home inspection in a conditional offer, but that practice all but gone by the wayside in this frantic market. Many potential homeowners are now opting to take their home inspector with them to open houses, where dozens of other buyers are doing the same thing.

“It’s really crazy,” said home inspector Shawn Anderson. “I was just in one recently where it was so packed it was like they were giving away free wine.”

With some people putting in bids on multiple properties before actually winning a bidding war, this can add up to thousands of dollars in extra costs during house hunting.

3. Write a personal letter

Although it’s far from a requirement to pen a magnum opus to the current owner of the home, Metro Vancouver realtors say it’s worth the effort in a bid to make a personal connection to the seller.

Serra said explaining why you want the home can give interested parties an advantage over others.

“We want to appeal to the seller and make sure our offer stands out over someone else’s,” he said.

In its tips for writing a letter, Realtor.com says homebuyers should use flattery whenever possible, and compliment the current owner on the condition or décor of their home. In a market like Vancouver, where many heritage homes are torn down to make way for newer buildings, it can help to mention if you’re planning to keep the home intact.

4. Appeal to the seller’s timeline

Your needs should come last when it comes to the real estate sale, says Serra. Home sellers don’t want to be bogged down while interested parties secure a mortgage or sell their current home, so try to make things work in the timeline they want. They may have purchased another property and don’t want to wait around to get out of their current residence.

New buyer Kyle Gould says he’ll take any advice he can get. Just moving to B.C. from Ontario, Gould says he has been hit by “sticker shock” and a big reality check about the market.

“It kind of smacked me in the face that it’s a wild game out here,” he said.

Source: CTV Vancouver
http://bc.ctvnews.ca/how-to-win-a-real-estate-bidding-war-in-metro-vancouver-1.2804164

Vancouver’s hot real estate market isn’t showing signs of slowing. January saw year-over-year growth of more than 20 per cent for the Metro region, according to the Canadian Real Estate Association.

That brings the average price of a home in Metro Vancouver to $775,300.

Thanks to hot markets in B.C. and Ontario, the national average home price grew a staggering 17 per cent to $470,297 – but without those two provinces, there would have been a decline of 0.3 per cent to $286,911.

“January 2016 picked up where 2015 left off, with single family homes in the GTA and Greater Vancouver in short supply amid strong demand standing in contrast to sidelined home buyers and ample supply in a number of Alberta housing markets,” said Gregory Klump, CREA’s Chief Economist in a statement.

“Tighter mortgage regulations that take effect in February may shrink the pool of prospective home buyers who qualify for mortgage financing and cause national sales activity to ease in the months ahead.”

New rules for mortgage rates took effect on Tuesday. Canadians are now required to put down a minimum of 5 per cent for the first $500,000 and 10 per cent for every dollar amount after that.

Two-storey single family homes posted the largest year-over-year gains nationally of nearly 10 per cent, followed by one-storey homes at 6.9 per cent, townhouses at 6.5 per cent and apartments at 5.2 per cent.

In stark contrast to Vancouver and Toronto’s housing markets, average home prices in Calgary saw a decline of three per cent year-over-year.

Nationally, the number of newly listed homes in January fell five per cent compared to December, and Canada’s largest housing markets such as Vancouver, Toronto, Montreal, Calgary, and Edmonton were to blame.

Source: Lauren Sundstrom, Vancity Buzz

The federal government is attempting to take some momentum out of the country’s most expensive — and frothiest — housing markets in Vancouver and Toronto, announcing Friday changes to mortgage lending rules that lift minimum down payment requirements on homes listed between $500,000 and one million dollars.

At a press conference in Ottawa, Finance Minister Bill Morneau said that as of Feb. 15, buyers purchasing homes in that price range will have to make a minimum down payment of 5 per cent on the first $500,000, and 10 per cent of the dollar value above that amount.

Morneau used the example of a $700,000 home, which will now require a minimum down payment of $45,000, or an increase of $10,000 above what the existing minimum of 5 per cent would require.

“By targeting higher priced homes, we’ll minimize the impact on first time buyers,” the minister said. “This protects all homeowners, including middle class Canadians whose biggest investment is in their homes.”

Benchmark home prices in Vancouver and Toronto have rocketed higher this year amid ultra-low borrowing rates and sustained interest from foreign buyers, experts say. Each city’s boom has led to market dynamics in those centres that are “not as stable as they should be,” Morneau said.

“The motivation of the [new] policy is clear,” Benjamin Tal, economist at CIBC Economics said. “The attempt is to slow down the only two markets that are really moving (Toronto and Vancouver). Those markets happen also to be the most expensive.”

How effective the new minimums will be in cooling off those markets isn’t clear — the finance minister said the change would affect “one percent or less” of borrowers.

Fears over a possible real estate bubble in the Vancouver and Toronto areas have risen significantly as prices have surged.

In November, benchmark prices in Vancouver surged 17.8 per cent as sales soared 40.1 per cent, the region’s real estate association said.

In slightly tamer Toronto, benchmark prices increased 10.3 per cent as sales climbed 14 per cent compared to November a year ago, making 2015 the most active year on record for the country’s biggest housing market (eclipsing 2007).

The Vancouver and Toronto markets have firmly decoupled from the rest of the country, where home prices are moving at a far slower rate of about 2.5 per cent, according to CREA, the national real estate board.

What’s fueling the torrid price gains remains a matter of fierce debate, but many suspect a wave of foreign cash is playing a key inflationary role. Rock bottom interest rates are also continuing to fuel domestic demand.

“An influx of foreign wealth is one driving force, but lower interest rates — and the witches’ spell of forever-low rates—are also stirring the pot,” Sal Guatieri, economist at BMO, said in a recent note.

Source: Jamie Sturgeon, Global News

Sales — and prices — have hit new records in both Toronto and Vancouver this year. A further interest rate cut by the Bank of Canada could further fuel flames in the country’s two biggest real estate markets which are once again showing signs of overheating, housing watchers say.

“It’s another log on the fire for the Toronto and Vancouver housing markets,” says economist Sal Guatieri, vice president of BMO Economic Research, who expects to see a cut next week in an attempt to kickstart lagging growth.

“It’s not the amount that matters — the reduction in borrowing costs will be quite minimal — it’s the message it sends to homeowners and potential buyers that rates are going lower rather than higher and will almost certainly stay low for quite some time. That just encourages more people into the market.”

Both of Canada’s priciest cities are already swamped with far more buyers than properties for sale.

Sales — and prices — have hit new records in both Toronto and Vancouver this year. The frenzy has been driven by low interest rates, an ongoing shortage of listings and a growing sense of panic, especially among first-time buyers, that if they don’t get in now, they will be locked out of the market forever, particularly the low-rise house market.

“We are becoming concerned again about the possibility of a housing bubble in Toronto and Vancouver because prices are rising so much faster than incomes and because interest rates are continuing to fall rather than go up,” says Guatieri.

“We were much more comfortable a year or two ago when both markets seemed to have cooled off a bit and prices were rising more moderately.”

Both Toronto and Vancouver set new sales records for the month of June.

Almost 12,000 houses and condos changed hands last month across the GTA, up 18.4 per cent from a year earlier. The average sale price of a detached house was $816,583 – and over $1 million in the City of Toronto – up 14.3 per cent year over year.

Greater Vancouver’s 4,375 sales were up 28.4 per cent for the same period. The average detached house was $1.45 million – and a staggering $2.39 million for a stand-alone house in the core City of Vancouver – up 20.2 per cent from June of last year.

Condo sales skyrocketed in both regions, up 22.4 across the GTA and 35.6 per cent across Greater Vancouver, year over year.

All that demand helped push up condo prices 6.3 per cent in the GTA, to an average of $390,894, and up 5.6 per cent in Greater Vancouver to $479,450.

Last January’s surprise Bank of Canada rate cut to .75 per cent has been a contributing factor to those escalating sales and prices, says Penelope Graham, editor and spokesperson with mortgage comparison site RateSupermarket.ca.

A cut to .5 per cent, as is expected, would see the five-year fixed rate dip below the current low of 2.39 per cent and further boost the illusion of affordability, she said.

“There are more people now entering the market with just five per cent down, because that’s all they can afford. There is a real sense of urgency in the bigger markets to get in now, before it’s too late, and get in with what you have,” says Graham.

“That’s potentially putting people in a really vulnerable position in terms of their debt levels.”

Toronto realtor David Fleming says he’s seeing a surge in demand even for condos — especially under $400,000 — and younger buyers than ever, backed by low interest rates and help from their real-estate rich baby boomer parents who want only the best for their children.

“I’ve seen a serious culture change. Young buyers used to be 26 or 27 years old. They’d graduated university, worked for a few years and lived at home then rented and bought. Now buyers are cutting out those middle steps.”

He’s seeing first-time buyers as young as 22 determined to own rather than rent. And he’s hearing from people who stepped to the sidelines three or four years ago, thinking the much-talked-about bubble was about to burst.

Instead, they’ve watched prices climb further out of reach: Back in June of 2012, the average sale price of houses and condos combined across the GTA was $508,622. This June, the average sale price was $639,184.

Where the average sale price of a condo in the sought-after City of Toronto was $364,597 in June of 2012, last month’s average was $418,599.

That was up seven per cent just over June of last year as bidding wars and bully bids — long the hallmark of the highly competitive low-rise house market — have pushed up prices for well-located, unique or larger condos seen as sound investments and house alternatives for the longer term.

“That’s a testament to the froth in the house market,” says BMO economist Guatieri.

“So many people are now priced out, they have no other alternative than to get into the condo market, and that’s pushing up prices, even though there is ample supply.”

Apart from the oil-impacted markets of Alberta, Saskatchewan, Newfoundland and Labrador, Canadian house prices are holding up well and consumer confidence appears to be strong, even in the midst of growing talk about a possible recession.

“None of my clients are talking about the Big R word,” says Toronto-based mortgage broker Jake Abramowicz.

“They’re confident that rates will stay low for a very long time now and that the market — both condos and houses — will not correct anytime soon.”

Source: Susan Pigg, Toronto Star