Here we are on the last day of 2018, and as is the case at this time every year we’re looking forward to the New Year and hopefully seeing greater prosperity on the horizon – whatever business it is that you’re in. If it’s real estate, you’ve almost certainly become aware of the downturns we’ve seen in the detached homes market in what were Canada’s hottest markets for them, Vancouver and Toronto. While this isn’t a boon for the industry, per se, most realtors will agree that a correction of this sort is long overdue and likely beneficial in the long term.
What we can say for certainty is that 2019 – like any other year – will offer opportunities and challenges for realtors in Canada. Market dynamics aside, you’re in competition with ever-greater numbers of realtors every year. The number of newly-licensed realtors registering with the real estate boards across Canada is considerable, and the reality is there’s always a greater quantity of new realtors than there is an increase in the amount of business to be shared among them.
Client prospecting becomes more of a self-generating engine as you established yourself in the biz, but even experienced realtors will sometimes find they’re not getting enough based on the level of effort they’re putting into it. Whether you’re a new realtor, a veteran one, or anywhere in between – our online real estate lead generation system here at Real Estate Leads can really boost your results and put you in a position to establish yourself as the expert clients want to work with.
With that said, let’s wrap up 2018 with a look ahead to what’s forecast to be in store for the Canadian real estate market in 2019.
Mortgage Stress Test Making Overall Sales Continuing to Dip
There’s no debating that the mortgage stress test, which was initiated in January 2018, will continue to have a major impact on sales. The fact that homebuyers must qualify for mortgages at higher rates than the contracted mortgage rate is going to continue to limit the number of would-be buyers who are deemed to be qualified buyers. The bottom line of this equation – whether borrowers have the ability to continue making mortgage payments if interest rates increase – is going to mean there’s less of the pie to go around.
It’s noteworthy to look back to late 2017, where some buyers doubled up their speed as they searched for a home, with an eye to avoiding the mortgage stress test. That 46,000 homes were sold throughout Canada in December 2017 supports that, as does the fact that housing transactions dropped 14% in the month following the onset of the stress test.
Stronger Market in 2019 Stemming from Lacklustre 2018 One
Overall, 2018 wasn’t particularly good for home sales. The plus is that there was no major economic shock, and it’s for this reason industry experts believe that the Canadian real estate market is likely to remain steady at the very least. In the best scenario, we may even see a slight growth in 2019.
The price tags attached to homes across the country should move in relation to the strength of the economy, according to the Canada Mortgage and Housing Corporation (CMHC). Provided there is stable growth in income, jobs, and population, so will go the vitality of the housing market.
The CMHC predicts that sales through the MLS will be lower than 500,000 in 2019, which is in line with 2017 but coming in at less than 2016. This prediction was issued with another one stating that the average home price across the country won’t reach $525,000. Regional real estate markets of course will have their own realities with regards to all of this.
Local Markets Revised by Changing Mortgage Regulations
When we scrutinize specific housing markets throughout Canada more closely, we can see a consistent picture. Toronto real estate didn’t move as quickly in 2018 compared to both 2017 and 2016. This was with all of Ontario showing a slowdown in housing transactions that came along with a flattening of sales prices seen from the second quarter of 2017 onwards.
This slowdown is probable attributable to the new taxes imposed on foreign homebuyers in the province. The CMHC is insisting that urban housing markets throughout Ontario will recover from a slump in 2018, and this recovery will be fuelled by predicted job growth and in-migration.
Out west, their expectation for B.C.’s housing market is that it will moderate even more than it has so far. This is a result of economic contraction and more people moving out than moving in. Yes, Vancouver real estate prices have been growing, but they’ve done so at a slower rate during the time where new transaction taxes on foreign buyers have been in place.
The stat showing that there were 35% fewer Vancouver home sales in October 2018 as compared to the same of 2017 is very much a telltale sign of what’s happening with the Vancouver market, and it will have repercussions for the overall strength of the home sales market all through 2019.
In Calgary, changes to the real estate market were more moderate. Resales dipped 9% in October 2018 compared to the year before, and the composite housing price index proceeded to drop 2.6% in October year-over-year. Interestingly, Calgary was the only large housing market to see a decline in the composite housing price index for October of the years that’s coming to an end today.
The industry consensus is also that real estate in the Prairies will continue to be moderate, and again as a reflection on the local economy’s heavy reliance on fossil fuels and other extractive industries. There are a few, however, who believe these housing markets are actually set up nicely for growth trends.
More than anywhere else in the country, Montreal is expected to benefit from a projected boost in foreign buyers in 2019, and in large part it has not followed Toronto and Vancouver’s leads in imposing taxes on foreign buyers. Rental vacancy rates in Montreal dropping due to a larger demand caused by a strong economy and in-migration will also be a factor.
In Atlantic Canada, the CMHC is predicting that the number of units sold and the prices for existing homes in Nova Scotia will both see increases. Nova Scotia will be the exception in Atlantic Canada, however, with real estate markets in other Atlantic Canada cities continuing to struggle due to lower population growth.
Happy New Year to Everyone from all of us here at Real Estate Leads! We hope 2019 treats you well and that it’s a goody year for your real estate business.
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