Housing market expected to remain weak for another year

Sales declined in February and are not expected to rise nationally until 2020

Housing market expected to remain weak for another year
Steve Randall

Canada’s housing market remains under the cloud of higher interest rates and the mortgage stress tests that have dogged sales for the past year.

In its latest reading of the national market, the Canadian Real Estate Association forecasts that resales in 2019 will be 1.6% below the 2018 total, meaning a total of 450,400 units, the weakest annual sales since 2010.

There is some positivity from the reduced likelihood of further interest rate hikes this year, but CREA is not predicting an overall gain until 2010 when a 2% rise to 459,400 units is projected.

The forecast follows data from February which shows national home sales plummeted 9.1% month-over-month with actual activity down 4.4% year-over-year.

"February home sales declined across a broad swath of large and smaller Canadian cities," said Gregory Klump, CREA's Chief Economist. "The housing sector is on track to further reduce waning Canadian economic growth. Only time will tell whether successive changes to mortgage regulations went too far, since the impact of policy decisions becomes apparent only well after the fact. Hopefully policy makers are thinking about how to fine tune regulations to better keep housing affordability within reach while keeping lending risks in check."

Bitter pill
CREA president Barb Sakkau said that for those homebuyers on the sidelines, the mortgage stress test was a “bitter pill to swallow when policy makers say the policy is working as intended.”

The national average price is forecast to edge higher by 0.8% to $490,800 in 2019, reflecting further average price gains in Ontario, improving sales activity in British Columbia and Alberta (despite further price declines), and the combination of both higher sales and average prices in Quebec.

Average price trends across Canada in 2020 are generally expected to be more moderate versions of those in 2019, with small declines in British Columbia, Alberta, Saskatchewan and Newfoundland and Labrador, and modest gains in all provinces from Manitoba through to the Maritimes.