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Which factors will affect Montreal’s housing market in 2016?

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As 2015 comes to a close, these three factors are likely to play the largest role in determining where Montreal’s real estate market will head in the coming months.

Stock market volatility

Whether the stock market strengthens or weakens during the last quarter of 2015 will have an effect on both demand for real estate, and potentially on mortgage rates as well.

When the stock market slows down, there is a general decrease in the overall wealth of many Canadian consumers. This limits the opportunity to borrow, especially when dealing with luxury real estate and top-tier real estate.

For buyers who are not depending on equity from stocks or bonds to finance their home, a drop in the stock market could actually be a good thing. Mortgage rates tend to decline following major stock market declines. This presents a good opportunity to lock in a low rate for the first 5 years of their loan.

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Interest rates

After a glorious summer of all-time low interest rates, sellers are curious to see whether Canada’s major banks will continue slashing their rates or whether they’ll start creeping back up in the coming months.

The five year fixed mortgage rate is the most important one to keep an eye on, since this is the most popular plan amongst homebuyers. It goes without saying that the lower the rates, the more incentivized consumers are to plunge into homeownership, especially in light of Montreal’s current buyer’s market.

Economists at BMO, CIBC and RBC all speculated that no further cuts would be made to the overnight rate. However, CIBC economist Andrew Grantham also mentioned in an interview with BuzzBuzz Homes, that he did not see the rates increasing by a substantial amount either. In any case, first time buyers or investors thinking of making a purchase in the coming months should consider locking in a rate as soon as possible, as a measure of precaution.

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Want the whole scoop on investing? Download our free e-book here.

Oil prices

The factor that is likely to have the most profound effect on Canad’s real estate market is the energy sector.

While falling oil prices in Alberta, Saskatchewan, Newfoundland and Labrador will adversely affect the housing market in those areas, it is predicted to drive demand for real estate in Montreal, especially from foreign investors. We covered this point in detail here. 

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