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business briefing

Briefing highlights

  • Housing markets in 2019
  • Comparing Canadian, U.S. jobs markets
  • Markets at a glance
  • BlackBerry to buy Cylance
  • Manufacturing sales edge higher

‘A long way from the heady days’

Canadian housing markets appear to be settling into a “prolonged period of calm,” with the stability policy makers had hoped for and just tiny price gains on the horizon.

That’s the takeaway among economists who scoured the Canadian Real Estate Association’s latest report, which showed resales down 1.6 per cent in October from September and 3.7 per cent from a year earlier.

Average prices eased 1.5 per cent in October from the same period last year, while the MLS home price index, considered a better measure, rose 2.3 per cent.

“In other words, activity has picked up from the early-year lows, but is still a long way from the heady days of 2016 and early 2017,” said Bank of Montreal senior economist Robert Kavcic.

How did we get here?

A combination of rising interest rates, provincial measures aimed at cooling bubbly markets such as Vancouver and Toronto, and, importantly, new mortgage-qualification rules from the federal bank regulator.

“Policy makers are probably pleased with what has so far been an orderly slowdown in housing, with markets across the country generally balanced and prices growing at a more manageable pace,” said Toronto-Dominion Bank economist Rishi Sondhi.

As such, economists now see a largely stable market, though Vancouver is still experiencing a deep sales slump. And they expect the stability to run for some time, which means homeowners should expect slim gains in property values while home buyers see affordability not getting much worse.

That’s on the price side. Interest rates are forecast to continue rising, though.

“At this point, it’s looking more and more like a prolonged period of calm could be setting in for Canada’s housing market, or outright stagnation in some of the major centres,” Mr. Kavcic said.

“The Bank of Canada is expected to continue tightening, albeit gradually, residential mortgage credit growth has slowed to a 17-year low and, for the first time in a decade, borrowers coming off a five-year fixed-rate mortgage will soon be doing so in a world where current rates are at least as high as at origination.”

There are, of course, regional differences.

But generally, like Mr. Kavcic, Royal Bank of Canada senior economist Robert Hogue sees next year as “more or less in a holding pattern,” giving the new mortgage rules, the provincial measures in British Columbia, rising rates and the “stretched affordability” that exists now.

“Our view is that these factors will limit the home resale recovery to a small 2.8-per-cent gain in Canada in 2019, reversing just a fraction of the 10.2-per-cent decline we project for 2018,” Mr. Hogue said.

“Perhaps more importantly, these factors will also significantly constrain buyers’ purchasing budgets,” he added.

“We project Canada-wide prices to increase just barely by 0.8 per cent next year, following a 3.1-per-cent gain this year (and an average rise of more than 10 per cent in the past two years).”

BMO’s Mr. Kavcic raised an interesting point, that the increase in prices is now running at about the pace of annual inflation, which means that costs “on a national basis (and the same is true for most major cities) are no longer rising in real terms.”

That, he added, “is meaningful because, with the exception of a brief period during the 2008-09 recession, we haven’t seen anything but real home price gains for about 18 years."

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Labour markets

Policy can work, The Globe and Mail’s Matt Lundy writes. Just compare the Canadian and U.S. labour markets.

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Markets at a glance

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