CREA predicts a decrease of $1.1 Billion in Economic Activity in 2018 as Home Sales Fall

Wednesday Dec 20th, 2017


The Canadian Real Estate Association (CREA) previous forecast published in September identified changes to mortgage rules as a key downside risk. Indeed, this risk materialized in October when tighter mortgage regulations that take effect next year were announced. Among other things, the new rules make it tougher for would-be homebuyers with more than a 20% down payment to qualify for a mortgage.

Recent research by the Bank of Canada suggests that once they come into effect, tightened mortgage rules will reduce sales activity in housing markets across Canada, particularly in and around Toronto and Vancouver.

The anticipated decline in Canadian sales activity in the first half of 2018 due to an erosion of housing affordability from tighter mortgage regulations may mitigated by a number of factors. Some buyers may qualify for a smaller mortgage by purchasing a lower priced home, others may opt to stretch the amortization period when financing their purchase, while others are anticipated to stay on the sidelines as they save up a larger down payment before purchasing and contributing to a modest improvement in sales activity in the second half of 2018.

In 2018, national sales are forecast to number 486,600 units, a decline of 5.3% or 27,000 fewer transactions versus 2017. 

The overwhelming majority of the forecast decline in sales next year reflects an expected decline in Ontario sales, …

Based on research by Altus Group, the forecast annual decline of more than 27,000 sales from 2017 to 2018 translates into a decrease of $1.1 billion in economic activity and nearly 12,000 fewer jobs.

The national average price is forecast to edge down by 1.4% to $503,100 in 2018, in large part due to a record number of higher-priced home sales in and around Toronto in early 2017 that is not expected to be repeated in 2018.

New mortgage rules and further interest rate increases are expected to further hold sales in check in Greater Vancouver and Greater Toronto. As a result, the average price is forecast to hold steady in British Columbia in 2018, while declining by 2.2% in Ontario.

In an extension of current trends, average prices in 2018 are forecast to rise in Quebec, New Brunswick and Nova Scotia. However, price gains in 2018 will be restrained in all markets by tougher mortgage qualification criteria for low-ratio mortgages that will weigh on higher-end home sales activity.


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