The global economy is slowing down, that’s true. With snail’s pace economic growth, a recent survey showed that most Canadians, including many homeowners, want to see house prices drop, as well. With weakened housing markets around the country, that wish might actually be realized.
A Few Factors at Play
The federal government’s mortgage stress test and rising mortgage rates have created pressure in real estate markets across the country.
Canada’s real estate markets are already feeling the pinch of rising mortgage rates and the federally-mandated mortgage “stress test.” But it’s not all bad news. Vibrant immigration levels and a robust job market are bracing the housing market.
Experts are pretty adamant, though, that home prices escalating at the speed of a bullet are basically over in most all housing markets across Canada. From now on, Canadians can expect less of a sales frenzy and warm (if any) price increases.
More Debt Defaults
The Bank of Canada started raising interest rates more than a year ago. Even a menial hike can put added financial stress on borrowers. It has, and will continue to, become more pronounced in terms of real estate sales. Canada’s licenced insolvency trustees predict more Canadians will default on their mortgage loans moving into late 2019.
An Election Issue
Affordable housing is one of the top issues for the federal election that’s upcoming this October. The Royal Bank of Canada says housing has never been less affordable. It’s a top issue, especially for younger Canadians. In fact, about 64 per cent of Canadians are asking for the federal government to intervene to do something about home prices. On the upside, affordability will, most likely, be at a standstill instead of worsening.
The Market to Remain Stable
Experts says there’s no danger of a market crash in the foreseeable future. Unless the country experiences a major economic crisis, the real estate market should remain on an even keel. Subprime mortgages were one of the main contributors to the crash in the U.S. in 2007, but Canadians are much more creditworthy, according to Canada’s Chartered Professional Accountants (CPA). And creditworthiness has only improved in recent years. Those homebuyers with good or excellent credit rose to more than 82 per cent from a little better than 79 per cent between 2013 and 2017.