Aug 24, 2018
TD Economics housing report: stabilization emerging in the Canadian market
Changes to lending rules and provincial policies along with rising borrowing rates have led to a tumultuous year so far for Canadian housing markets. Sales and prices fell sharply in the first seven months of of 2018, by 17% and 5% year-over-year, respectively. However, signs of stabilization are emerging across the country with sales, listings and prices all moving higher in recent months, according to a new TD Economics report "Cue the comeback: Canadian housing markets find their footing after policy-related stumbles".
In a prior report, TD Economics had anticipated that the impact from new regulations and higher mortgage rates would be felt broadly across provinces, which came to pass.
- Improved performance seen in recent in months was mainly driven by Ontario and Alberta, with New Brunswick providing an additional boost. As anticipated, activity also held up well in Quebec. Notably, Toronto's market also appears to be turning around a very soft start to the year.
- The highly localized nature of housing market dynamics means that not all are moving in the same direction. Key markets are softer in other parts of the Prairies and the Maritimes. Markets also remain weak in B.C., where Vancouver has yet to find a bottom amidst lingering government policy impacts and rising mortgage rates.
- An ongoing improvement in activity is likely over the next few quarters, but the level of sales for the whole of 2018 won't be able to recover what has been lost.
"Our view has been that Canada's major housing markets would regain traction after sharp initial adjustments to lending rule changes, which has been the case," said Rishi Sondhi, TD Economist and author of the report. "But this stabilization shouldn't be interpreted as the start of another strong rally as buyers are still being challenged by rising borrowing costs and stretched affordability conditions in parts of the country."
For more information and regional analysis, read the full report.