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2016 has been a year of changes- with new mortgage regulations, amendments to real estate taxation laws, and uncertainty over the effects of the American election on the Canadian market. But Canada’s Real Estate Association (CREA), which represents about 115,000 realtors across the country, predicts a major levelling off in 2017. Here’s what economists, analysts and realtors are forecasting for the residential real estate market in the upcoming year.
Home prices expected to rise
The average price of Canadian homes, including co-ownerships, is expected to rise by 2% in 2017, according to the Royal Bank of Canada’s latest forecast. The new aggregate home price is expected to climb up to $448,900.
This figure is considerably smaller than the increase seen in 2016, as the average selling price in the Greater Toronto Area rose 17% in 2016 and 8% in 2015. Comparatively, Montreal’s growth has been more stable, with a rise of 1.3% in 2016 and an expected rise of 1.4% in 2017 (according to the CMHC).
Drop in residential real estate sales
RBC predicts home sales in Canada will total $467,100 this upcoming year, an 11% drop from $527,900 in 2016. With a stable economy and more than half of Canadians wanting to buy a property within the next 5 years, homeownership levels are on the rise while sales are slowing down.
Interest rates may drop even further
In November of 2016, both RBC and TD Bank effectuated a small increase in their fixed mortgage rates, but the Bank of Canada this week announced it was holding the overnight interest rate at 0.5 per cent. No further rate announcements were made by either bank regarding the new year, although policymakers are suspecting a further cut.
David Madani, senior Canadian economist at Capital Economics announced: “We expect a more pronounced downturn in housing activity to prompt the bank to cut interest rates to 0.25 per cent”
BMO countered this view, seeing instead a stable rate continuing into 2017 with a potential rate hike in 2018. “With fiscal policy expected to kick in more obviously in Canada as well as the US next year and oil prices seemingly holding a firmer floor with the OPEC deal, the [central] bank appears perfectly content to stay on hold” (BMO Chief Economist Douglas Porter).
Desjardins has also announced that they are likely to maintain the status quo throughout 2017.