Calming seen for housing markets in 2018

January 16, 2018

After a tumultuous year, 2018 should see a much calmer Canadian housing market, according to James Laird, co-founder of RateHub Inc. and president of CanWise Financial.
Laird predicts that no further federal-level mortgage regulations will be introduced in 2018 and any mortgage rate increase will be modest.
“Over the past several years there has been a steady flow of new regulation imposed on the mortgage industry. Maximum amortizations have been reduced, minimum down payments have increased and stress tests have been added. Some are worried that current regulation has gone too far, which is why the federal regulators will take a break in 2018,” Laird stated.
He also projected that variable and fixed rates will experience a modest rise, at best. “The Bank of Canada will increase the key overnight night rate by 0.5 per cent, causing all variable rates to rise. This will put upward pressure on bond yields which will cause fixed rates to rise as well.”
“The Canadian economy is doing well, so the Bank of Canada will choose a modest strategy of two rate increases [in 2018], with a few months in between each move,” Laird forecast.
In addition, average home prices are expected to remain relatively steady, neither increasing nor decreasing drastically.
“The macroeconomic factors that have been driving price appreciation will persist in 2018. Net new immigration, scarcity of housing supply, economic growth and first time home buyers entering the market will put upward pressure on housing prices,” Laird explained. “However, the new stress test combined with rising interest rates, and foreign buyers taxes will act as an effective counter-balance, causing no net-change.”