25 July 2018

According to TD economist Omar Abdelrahman, there were several signs during the past few weeks that the market has adjusted to the new mortgage rules and a stress test.

“Sales of existing homes were up by 4.1% last month, and the relatively broad-based growth almost fully offset the previous months’ declines”, – he noted.

In his opinion, the recent increase of housing starts is one more proof that the market will be warmer in the nearest future.

While sales are expected to grow soon, RBC predicts an annual 11.5% drop in sales by the end of this year. RBC economist Josh Nye says the main reasons for this downward pressure are the new mortgage rules and growing interest rates.

“In addition to the new mortgage stress test, we can see interest rates rising, and it affects housing affordability making it more difficult for some buyers to make a purchase”, – said Nye.

As the market is becoming more balanced, Nye says home prices will go up by 1.8% on a year-over-year basis in the second half of 2018.

It should be noted that not all Canadian real estate markets react to the pressure in one way. For instance, BMO says the economies of Ottawa, Quebec City, Hamilton and Edmonton are showing strong performance this year, just like their housing markets.

“As a rule, employment possibilities represent the main factor affecting migration tendencies. In other words, there are two reasons to move: if you want to find a job you don’t have now or if you want to find a job with a higher wage than you have today”, – BMO senior economist Robert Kavcic says.