The pronounced downturn in the country’s real estate market has not been enough to get the Canada Mortgage and Housing Corporation to lower the red flag it has been flying for the past nine quarters. The housing agency continues to see a high degree of vulnerability in the overall market.
High prices and the usual suspects
Overvaluation remains the key concern in Victoria, Vancouver, Hamilton and Toronto. The biggest, busiest and most expensive markets in the country continue to dominate the calculations.
The latest figures from the Canadian Real Estate Association show that prices are moderating. CREA reports a 4.9% decrease in the national average price in December, compared to a year earlier. The association is forecasting an overall decline of 4.2% for 2018, compared to 2017. But the association points out that most of that drop is compositional, based on lower sales of high priced homes in Vancouver and Toronto. When sales are weighted to compensate for the two most expensive markets in the country, the price decline comes in at about 1% for a national average of just under $489,000.
CMHC notes these falling prices, especially in British Columbia and Ontario, and says the markets are falling in line with economic fundamentals.
Policy headwinds
CREA continues to point to government policy and rising interest rates as the biggest drags on the housing market. The association is projecting an 11% drop in sales for 2018, and in its latest report shows a 2.5% decline between November and December.
As with CMHC, CREA points to the influence of Toronto and Vancouver on the overall numbers. Slowdowns in these two markets mask on-going improvements in Quebec, led by Montreal, and the Maritimes.
2019 looks a little brighter
Looking ahead to the rest of this year the realtors are a little more optimistic. CREA sees the national average home price gaining about 1.7% to just shy of $500,000. It is also forecasting a very modest decline in sales of about 0.5%.
CREA says economic fundamentals such as population, employment and wage growth remain favourable for the housing market.