The Canadian Real Estate Association (CREA) recently revised its 2019 sales forecast for the residential resale market, based on figures from each provincial Multiple Listing Service®(MLS®) Systems.
National sales are expected to decline by 9.8% to 462,900 by the end of 2018. This is a small drop relative to CREA’s previous forecast in June.The market is held back by unprecedented decreases in sales activity in British Columbia, and weak (but stronger than expected) sales activity in Ontario. Both provinces are forecasted to see double digit declines by the end of the year.
Sales in Alberta and New Brunswick have been stronger than expected in the second half of 2018, resulting in an upward revision of their 2018 sales forecasts. However, activity is predicted to taper down over the rest of the year, in both provinces.
In Montreal, sales have increased by 7% over the past 4 quarters, according the the latest Centris data.
What are the factors resulting in declining sales activity?
While economic and demographic fundamentals remain strong in most parts of the country, policy changes in 2017 and 2018 have impacted homebuyers’ access to mortgage financing in many housing markets.
Notably, the new federal mortgage stress test was intended to keep home sales in check, and will succeed in doing so through to 2019.
Interest rates are also on the rise, further reducing buying capacity. Additional interest rate increases are on the horizon later this year and in 2019, which will make it harder for borrowers to qualify for financing.
Will home prices increase or decrease?
The national average price is forecasted to drop by 2.8% to $494,900 by the end of this year. The forecast has been further revised to reflect continual dropping of sales activity in British Columbia.
Note that the average price is heavily skewed by a reduction of sales in the luxury home market. More than half of all provinces are predicted to see average price gains in 2018, including British Columbia.
Meanwhile, home prices in Montreal are expected to continue rising following steadily firming market conditions.
- The average home in Montreal costs $465,159, an 8% increase y-o-y.
- The average condo in Montreal costs $304,000, a 5 % increase y-o-y.
- The average ‘plex in Montreal costs $540,000, an 8 % increase y-o-y.
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