After a screeching halt sometimes comes a crash. This was the year when Canada’s housing market hit the brakes. So what will happen in 2019?
Predicting housing prices is famously difficult. And forecasting housing meltdowns like the one that nearly brought down the global financial system in 2008 may be downright impossible. For now, though, the way experts cautiously paint the future for next year is closer to the picture of a landing plane than that of a rocket ship plummeting earthward.
The Canadian Real Estate Association (CREA) sees home sales rebounding a little (2.1 per cent) next year, with home prices roughly keeping up with inflation (2.7 per cent). In Ontario, prices will likely climb a little faster (3.3 per cent) and in British Columbia, a bit more slowly.
Quebec, New Brunswick, Nova Scotia and Prince Edward Island can also expect modest price gains, while Saskatchewan and Newfoundland and Labrador will experience a small dipping. The forecast for Alberta was stable prices, although that predated the recent oil price plunge.
The big banks expect interest rates to continue to rise to between 2.25 per cent and 2.75 per cent by the end of 2019. And that will keep turning the screws on Canadians’ budgets, with more money going toward mortgage and other debt payments and less left as disposable income. Climbing rates will also continue to raise the bar for wannabe homeowners who to pass the federal mortgage stress test in order to qualify for a new mortgage.
Though a housing crisis next year isn’t impossible, U.S.-based investment giant Vanguard says the risk of a housing crisis — which they define as a severe drop in housing prices in the span of a year that could trigger a recession — continues to be low.
Canada, along with Australia, stands out both for its sky-high housing prices and its gargantuan household debt levels. Home prices have grown by 24 per cent since 1999, compared to 18 per cent in Australia, 13 per cent in the U.S. and 12 per cent in the U.K. The amount that Canadian families owe, meanwhile, is as big as this country’s GDP, a level surpassed only in Australia, where household debt is now larger the size of the economy.
But Todd Schlanger, senior investment strategist at Vanguard Investments Canada, says the Canadian economy will likely continue to grow in 2019, albeit at a slower pace than in 2018.
In Vancouver, realtor Steve Saretsky sees a “full-blown buyer’s market” with prices that will continue to trend lower for detached homes, condos and townhomes alike.
His advice to buyers is to be patient.
“If you’re buying a home, plan to live there or hold it for the long term,” Saretsky, of Sutton West Coast Realty, told Global News.
Real estate investors shouldn’t count on price gains to make up for negative cash flow, he added.