REAL ESTATE 2018: WHAT TO EXPECT AS WE HEAD INTO A NEW YEAR, THE MOST COMMON QUESTION WE RECEIVE IS, “WHAT’S THE OUTLOOK FOR REAL ESTATE IN 2018?”
NO ONE KNOWS EXACTLY WHAT 2018 WILL BRING, BUT WE’VE OUTLINED EXPERT PREDICTIONS ON WHERE THE MARKET IS HEADED AND HOW GOVERNMENT INTERVENTIONS ARE EXPECTED TO IMPACT THE CANADIAN HOUSING MARKET IN THE YEAR AHEAD.
What does it mean for you?
HOUSING PRICES WILL REMAIN HIGH IN URBAN CENTRES Although the Toronto real estate market did experience a slowdown in 2017, housing affordability will remain a major issue in both Toronto and Vancouver in 2018. In its Canadian Regional Housing Outlook, TD Economics predicts ”The decline in sales activity in both Vancouver and Toronto has helped to redistribute the balance of power from a pure seller’s market, back towards buyers, as evidenced by the sales-to-listing ratios. But, first-time homebuyers sitting on the sidelines waiting for higher interest rates to trigger a market crash may be holding their breath for a while. Prices are likely to only reset back to levels that existed prior to a year of exorbitant gains.”
The high cost of living has forced a growing number of millennials to seek alternatives to traditional housing. PricewaterhouseCoopers predicts a rise in multi-generational and multi-family homes, a move towards larger condominiums to suit growing families, and a flight from urban cores as new public transit projects make commuting more feasible.
If you’re a current homeowner, you can expect your investment to hold its value and continue to appreciate over the long term. If you’re a potential buyer who has been waiting for real estate prices to drop, don’t expect a fallout any time soon. Governmental bodies have taken steps to slow down skyrocketing prices, which has helped to balance the market. Now is a great time to buy. And if traditional housing options don’t fit your budget, we can help you find alternatives to meet your needs.
GOVERNMENT INTERVENTIONS WILL HELP TO STABILIZE THE MARKET Skyrocketing real estate prices have caused Canadians to take on a growing amount of debt. Regulators at the Office of the Superintendent of Financial Institutions (OSFI) have attempted to curb the potential fallout with interventions, the latest of which went into effect on January 1.
Borrowers are now required to qualify for a mortgage at an interest rate two percentage points higher than their current rate to ensure they can manage payments when interest rates do inevitably rise. All federally regulated financial institutions will be obligated to utilize these requirements for both new mortgages and mortgage renewal applications of borrowers applying to switch lenders. It is not mandatory to apply the test at mortgage renewal for existing borrowers. What does it mean for you?
If you’re a buyer, your purchasing power may be impacted. If you’re concerned you may not be able to meet these requirements, securing your mortgage through a provincially regulated credit union may be an option. If you’re considering selling your home this year, these regulations could alter the type of buyer who will be willing and able to purchase your home. We have expertise in this area and know how to market your home to a changing demographic.
5 YEAR MORTGAGES WILL MAKE A COMEBACK Expect interest rates to rise in 2018. Bank of Canada has indicated that borrowers should expect to see rate increases this year … and notably, nearly half of Canadian mortgage holders are set to renew their mortgages in the next 12 months. According to LowerRates.ca, “Since January 2014, 56% of Canadian borrowers who applied for a mortgage through LowestRates.ca have gone variable, compared with 43% of those who got a five-year fixed. But this past August, there was a shift, where the five-year-fixed rate mortgage saw a sharp increase in applicants, with 59% of users on the LowestRates. ca site opting for this option versus only 39% opting for the variable mortgage.” What does it mean for you? If you’re in the market to buy, act now.
Rising interest rates will decrease your purchasing power, so act quickly before interest rates go up. And if you’re a current homeowner who is set to renew your mortgage, you may want to consider locking in a five-year-fixed rate.
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