Analysts see a soft landing for housing
March 06, 2018
The Canadian housing market is returning to a normal pace that will result in a “soft landing” for sales and prices, according to Dr. Sherry Cooper, chief economist at Dominion Lending Centres.
Cooper said there has been an overreaction from the government due to “overblown bubble worries” and “exaggerated debt concerns.” The resulting government actions, she said, accelerated a downturn in housing sales in hot markets like Greater Toronto and Metro Vancouver, but she forecasts resale prices will continue to increase in 2018.
Cooper is not alone in seeing stability returning to housing markets.
The hand-wringing over real estate is generally “much ado about nothing” and is almost certainly temporary, Peter Norman, chief economist with Altus Group which tracks new home sales, told the Toronto Star last week.
Cooper, who is also an adjunct professor at DeGroote School of Business, McMaster University, said the market can expect higher interest rates this year, with the benchmark five-year mortgage rate ascending to 5.2 per cent, up from the current 4.8 per cent range.
It is single-detached house prices that have taken the hit, dropping nearly 1 per cent across Canada in the past six months and down 5.5 per cent in Toronto and 0.7 per cent in Vancouver. Detached prices have fallen 5.4 per cent in Regina and 2.5 per cent in Calgary since last summer, she said. However, condominium prices continue to increase, up 7.9 per cent in Vancouver and 1.5 per cent in Toronto. Halifax led the nation with an 8.9 per cent spike in condo prices to $291,000 as of January.
Spurred by the condo sector, Cooper forecast that Canadian resale home prices would increase 5 per cent in 2018, down from the 9.1 per cent rise in 2017, but indicative of what she called “a soft landing for Canada’s housing market.”
Economic fundamentals, including very strong job growth, mean the bellwether Toronto housing market will lift, Norman said. He expects interest rates to stabilize this year and also sees home prices rising 5 per cent by the end of 2018.