Canada’s housing market ended 2015 on a high note. Now that 2016 is well underway, what factors will affect the Canadian real estate market this year?
2015 Was a Crazy Year for Real Estate:
- There was a 10 percent increase in home resale over the last year (2014).
- More than half a million homes changed hands in 2015 across Canada, the last time the market was this active was in 2007.
- Average prices increased by 12 percent, the strongest growth since 2009.
- Sales in the GTA grew by more than 11 percent.
- Sales in Vancouver jumped more than 33 percent.
A Few Factors Affecting the Market in 2016:
The price of oil is lower than it has been in decades. Currently, a barrel is trading for about $29, which is a drop of 60 per cent compared to June 2014. The oil, gas, and mining sector accounts for more than a quarter of Canada’s GDP. Many workers in these fields have been laid off due to production coming to a halt. When the energy sector is doing well – so are the real estate markets.
Although prices soared in Toronto and Vancouver, they fell in markets that were exposed to the resource sector. Sales in the GTA and Vancouver rose drastically while sales in Calgary plummeted nearly 21 percent.
The Low Loonie
The Canadian dollar is at an all-time low and it has lost more value against the US dollar than any other major currency. Some economists are saying that we might be “flirting with recession” and that the worst is yet to come. The low Canadian dollar is attracting a lot of foreign investment, with Vancouver being one of the most sought-after markets.
Mortgage rates are affordable, which is helpful for new home buyers. The very low interest rates encourage borrowing – with many people borrowing money to spend on housing. Economists predict that the interest rates will be lowered even further.
Canadians are currently living with excess household debt. This has resulted in debt growth that is outpacing income growth. When house prices go up, people are required to borrow more money to afford housing. Debt and housing are linked – mortgages represent more than 75 percent of the increase in household debt. As long as mortgage rates remain low, Canadians will be able to afford the increasing prices of real estate.
Although a few regions in Canada are experiencing a lull due to low oil prices, it is predicted that most of the country will experience growth in 2016.
What are your real estate goals this year? Are you in the market for a new home? Call me at 416-921-1112 and I would be happy to help.