Canadian Real Estate Market Forecast Updated by CREA

The Canadian Real Estate Association (CREA) recently updated its forecast for home sales activity through the Multiple Listing Service® (MLS®) for this year and 2019. While many parts of the country are still seeing strong housing fundamentals, some housing markets are struggling.

Last year, a new mortgage stress test was announced, and which was expected to prompt homebuyers to rush through their purchases before the new rules came into effect this January. Consequently, fewer transactions were anticipated for the first half of this year, but apparently, the response to the policy change was stronger than originally thought. Home sales for last December when seasonally adjusted, reached their highest level ever recorded before falling off sharply at the start of 2018. Actual sales figures for March, April and May are usually the most active months in a year, but the combined sales for these months fell to a nine-year low. Another factor is possible interest rate increases later this year and into next year, but despite this, home selling activity is expected to strengthen during the second half of 2018, albeit modestly.

The CREA took these factors into account and now they have revised their national sales forecast downwards. Now it is predicted to decline by 11%, to 459,900 units in 2018. It is a decrease that reflects weaker sales in Ontario and BC, provincial policy measures, high home prices, and housing market uncertainty, as well as new mortgage stress tests and supply shortages.

In 2018 the national average home price is predicted to be $499,100, which is almost the same as the previous forecast and is a decline of 2.1% compared with last year. However, only the average price in Newfoundland and Labrador is expected to see home prices fall by that much, with more than half of all provinces forecast to see increases. The average price reduction nationally is because fewer transactions are anticipated in Ontario and in British Columbia.

Next year, national sales are predicted to increase modestly but will still be at lower than levels recorded from 2014 to 2017. Part of the increase is due to the anticipated recovery in home sales during the second half of this year because of deferred purchases in the first half of the year in British Columbia and Ontario. The effect is expected to fade during next year as interest rates continue to increase.