What’s Ahead For Real Estate, Housing Prices, And Interest Rates in 2019?
As we begin another year, everyone wants to know: “Where is the housing market headed in 2019?”
The Canadian real estate market experienced a cooldown in 2018 following years of rapid growth. This left many homeowners and potential buyers feeling skittish. Fortunately, economists expect the market to stabilize in 2019 and continue to appreciate at a more sustainable rate. To help guide you through this shifting landscape, we’ve summarized some of the expert predictions and key factors expected to shape the housing market in 2019 and beyond.
SALES LEVELS WILL STABILIZE
A combination of rising interest rates, provincial policy changes, and a newly-implemented “stress test” requirement for mortgages pushed sales activity to a five-year low in 2018. However, economists expect the impact to taper off over time due to positive economic fundamentals: a strong economy, low unemployment, rising incomes, and rapid population growth.
“Far from a sign of trouble, we view this cooling constitutes as a healthy correction that would prevent overheating conditions from re-emerging in parts of Canada such as the Vancouver
and Toronto areas. We expect a modest recovery to take shape in 2019,” noted the Royal Bank of Canada in its Canadian Housing Market Forecast. “We see little risk of a downward spiral because demand and supply conditions are balanced in the majority of local markets and expected to remain so over the forecast horizon.”1
What does it mean for you? If you’ve been scared off by reports of a market slowdown, it’s important to keep things in perspective. Policy changes were put in place to cool down an overheated market that had led to increased debt levels, decreased affordability, and historically-low inventory levels. A gradual and sustainable pace of growth is preferable for long-term economic stability.
PRICES WILL HOLD STEADY
Economists expect prices to hold steady this year, rising slightly to keep pace with inflation. While the national average price declined by 4.2 % in 2018, the Canadian Real Estate Association predicts it will rebound slightly this year by 1.7 %.2
The Canada Mortgage and Housing Corporation also expect prices to remain high, but stable. “By 2020, demand is expected to continue to shift towards relatively less expensive housing options such as apartment condominiums. This combined with slowing growth in economic conditions will lead to a modest average price growth over the forecast horizon.”3
The Royal Bank of Canada agrees, cautioning that “would-be buyers hoping for a meaningful [price] break will likely be disappointed—we don’t expect aggregate prices to fall on an annual basis either this year or next.”1
What does it mean for you? If you’re a buyer waiting on the sidelines for prices to drop, you may want to reconsider. The current sales slowdown has made many sellers more willing to negotiate. Don’t miss out on the most favourable market we’ve seen for buyers in years.
NEW CONSTRUCTION WILL SLOW
The Canada Mortgage and Housing Corporation predict new home construction will trend down over the next two years from a 10-year high in 2017. “Single-detached housing starts are anticipated to decrease over the forecast horizon. Construction of this housing type will continue to be limited by residential lot availability, but also by elevated price and borrowing costs in some major CMAs that represent an important portion of national starts.”3
However, economists expect the decline to be gradual. According to Fotios Raptis, a senior economist at TD Bank, “a steep downturn in homebuilding nationwide appears unlikely. Canada's population is on the rise, medium-term income growth should remain healthy, and most markets are generally not overbuilt.”4
What does it mean for you? Buyers will continue to have options in new construction. But the decreased rate of supply should help prop up the resale market, which is good news for sellers.
INTEREST RATE HIKES WILL TAKE A BREATHER … FOR NOW
After a prolonged series of interest rate hikes, the Bank of Canada announced in December that it will likely slow its pace of rate increases. “We no longer expect the Bank of Canada to hike its policy interest rate in January. Spring 2019 now appears to be the more likely timing, allowing for the bank to ensure that the growth narrative is back on track,” commented Brian DePratto, a senior economist with TD Bank.5
At the same time, the impact of the mortgage stress test has slowed the pace of new mortgages being issued by traditional lenders. So even as funding costs have risen, banks have been hesitant to raise the 5-year qualifying rate. In its latest Mortgage Rate Forecast, the British Columbia Real Estate Association predicts that the 5-year mortgage rate will hold steady this year—and may even decline in the first quarter.6
What does it mean for you? If you currently have a variable rate mortgage, the bank’s revised policy should offer some welcome relief. And if you thought rising interest rates would prevent you from buying a home this year, you may be pleasantly surprised.
WE’RE HERE TO GUIDE YOU
While national real estate numbers and predictions can provide a “big picture” outlook for the year, real estate is local. And as local market experts, we can guide you through the ins and outs of our market and the local issues that are likely to drive home sales and values in your particular neighbourhood.
If you have specific questions or would like more information about where we see real estate headed in our market, let us know! We’re here to help you navigate this changing real estate landscape.
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If you plan to BUY this year:
If you plan to SELL this year:
- RBC Canadian Housing Market Forecast –
- CREA Resale Housing Market Forecast Update –
- Canada Mortgage and Housing Corporation Housing Market Outlook –
- TD Economics –
- TD Economics –