Homes and Condo Mississauga

4 Factors That Will Affect Housing Activity in 2018


1. New mortgage rules

Now that the mortgage stress test is in full effect, how has the housing activity been influenced so far and is this all underpinned with stress? It is still in its infancy to make a definitive call, because year-on-year comparisons of house sales and prices are skewed. It is not that we are failing in 2018, but that the first quarter of 2017 was record-breaking. There is certainly a bit of latency, but at the same time there are a few clear hot pockets in Ontario – Windsor, Kitchener – Waterloo, Ottawa, Muskoka – where the activity is up.

We have recently the six largest of Ontario mapped housing markets in the past 10 years and one thing is certain. Despite shifting economies, varying interest rates and changes in mortgage rules, the last 10 years have been beneficial for investors who have invested in Canadian real estate.

2. Interest rates

Rising interest rates are a sign that the economy is performing well. The Bank of Canada has already increased its main interest rate earlier this year and if the economy continues to grow at the current rate, further increases are likely. But this is not a reason for panic. When interest rates rise, this means that the economy is performing well, which means that people earn more money and are therefore more inclined to buy a house. This can well predict for home buyers and sellers.

3. Immigration and population

According to the 2016 census data, the Canadian population floats around 35 million people, with two-thirds of the growth between 2001 and 2016 being attributed to immigration. A growing population will also have a positive effect on housing activity and prices. The rental market already has multiple offers and bidding bars and the stock is low. The rental market is expected to warm up even more as most new immigrants rent before they buy and this can be great news for real estate investors.

There is a very good reason that Canada is in the spotlight on the world stage. Immigrants are attracted to Canada because of the vibrant economy, high standard of living and affordability – yes, that's right, affordability. Compared to other world-class destinations such as Hong Kong, London, Paris, New York, L.A. and others, and despite the affordability problems of Toronto, the city is still keenly priced.

4. Supply (and demand)

Housing activity – in particular supply and demand – is influenced by all the above factors. The rental market, along with apartment buildings and terraced houses, will continue to be stretched thanks to the growing demand from newcomers and starters priced from the single-detached market.

When it comes to relocated buyers, it is a chain reaction in which supplies are maintained, but not slightly worsened compared to the level of 2017. The new mortgage rules and rising interest rates have reduced the purchasing power of starters. When starters can not afford to buy starter homes, this has consequences for buyers who switch and are dependent on the proceeds of their start-up purchase to buy.

When you decide that you are ready to move, make sure you work with a reliable real estate advisor. Here are some tips for choosing the right agent.

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