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Welcome to my padlet about the Canadian housing market. Throughout this padlet you will see various images, videos and website links to better your understanding of the housing market in Canada.

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This graphic expresses that there was a difference in how the mortgage rates grow and fall over the years and how it is different based on your buyer status (first time, repeat, or investor). It is noted how high it increased around 2021 and 2022.

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This graphic expresses how in comparison to other statistics, Canada's housing prices are more overvalued homes in comparison to other countries in the world. This is interesting because although there was one dip around 2008, it is fairly consistently increasing since then until present day.

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This video reveals how the prices of the housing market in Ontario specifically, will rise be rising and how people are sometimes in some situations being forced to sell their houses due to other financial burdens.

This video was chosen because it is an interesting news interview that one would think is aimed towards adults with established homes already, but it also is aimed towards the younger population that is going to be buying homes in the coming years also.

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Forced sales increasing in Ontario’s housing market | Your Morning

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This video reveals many of the issues surrounding the rising home prices and why this is problematic for our population. This video mentions specifically Toronto and Vancouver as 2 of the most expensive cities in Canada to live in and they also mention the aspect of the rapidly rising population and how this contributes to the problem at hand.

I chose this video because I believe it showed the issues with the rising home prices with different points at hand than most other videos.

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What we can expect on housing in the federal budget | About That

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This website communicates many factors that are paying an influence on the housing market in Canada. Some of these things include, The Bank of Canada's benchmark rate, inflation, mortgage rates, housing supply, housing builds, rents, immigration and much more.

I chose to include this website in my padlet because it is quite current about the information thats affecting the housing market in Canada. Many websites only give a glimpse into one or two of the important factors, however this website encompasses all of the factors which I found very helpful in learning about it all as a whole.

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Thinking about buying or selling a home in Canada? These seven factors will shape the housing market this year.

For real estate, spring is typically a busy time. Many home owners list their houses for sale at this time to capitalize on the warmer weather and the spike in interest from prospective buyers, many of whom hope to get settled into new homes before the fall, when sales activity picks up once again. (Who doesn't want to host the holidays in a brand new home?)

Is now a good time to buy or sell your home?

The answer depends on a lot of factors. Before we get into market conditions, though, let's all agree March is a bad time to predict what will happen in Canadian real estate.

March 2020: COVID-19 lockdowns begin. Enough said.

March 2021: The Canadian Real Estate Association (CREA) forecasts the national average home price will hit $665,000 in 2021 and $679,341 in 2022. The average price reached $716,828 the following month.

March 2022: After peaking in February, home prices and home sales fall as the Bank of Canada (BoC) increases its benchmark rate for the first time in 2022. One or two more rate hikes should do it though, right? Right?

Where is Canada's housing market headed in 2023?

In March 2023, the outlook is about as certain as it's been the last three years. Predicting where the real estate market will go is incredibly difficult. Here are seven factors at play.

1. The BoC's benchmark rate

On March 8, after a year of rate hikes that saw the Bank of Canada's key lending rate rise from 0.25% to 4.5%, the Bank decided to press pause-welcome news for anyone shopping for a mortgage or paying variable interest on a loan. However, uncertainty persists here and south of the border. On March 7, Jerome Powell, chair of the Federal Reserve in the United States, talked about potentially needing to raise rates faster and higher than previously anticipated. However, the collapse of U.S.-based Silicon Valley Bank (SVB) on March 10 put the Fed's plan back into question. In Canada, news of SVB's failure sent government bond yields falling. Suddenly, there's once again talk of rate cuts being in the cards for 2023.

The US banking crisis has government yields down in flames. Hardest fall since 1980s.

In just over 3 trading days:

* US 2yr: -101 bps
* Cdn 2yr: -84 bps
* Cdn 5yr: -69 bps

Markets now fully pricing in 2 @bankofcanada CUTS by July. Absolutely breathtaking turn of events. pic.twitter.com/Ba7hrURA6A

- Rob McLister (@RobMcLister) March 13, 2023

2. Inflation

The annual rate of inflation has slowed in recent months, falling to 5.9% in January. That's likely an indication that the Bank's rate hikes are cooling price increases. However, food costs are up 10.4% from a year ago, and some economists are questioning whether it's even feasible in the short term to return inflation to its 2% target. Depending on inflation and the Canadian impacts of the SVB failure, the BoC may have to break its rate pause promise-which would further push down home prices.

3. Mortgage rates

Right now, variable mortgage rates (which are tied to the BoC's benchmark rate) are higher than fixed rates (which take their cue from five-year government bond yields). Normally, the reverse is true. To complicate matters, fixed rates fell at the beginning of the year and began trending upward again, at least until the U.S. banking crisis sparked by SVB. For now, rates remain volatile. Though home prices have fallen sharply since their peak in February 2022, high rates are negatively impacting mortgage affordability, which limits the amount buyers can borrow for their home purchase. Prices may not recover until affordability improves.

What's The Word On Fixed Mortgage Rates? DOWN Is The Word

With the failure of 2 US banks on the weekend and the shock that went through the markets Bond Yields fell yesterday and although they retraced a bit after today's US inflation report: Lower Fixed Rates

2/

- Ron Butler (@ronmortgageguy) March 14, 2023

4. Housing supply

One of the reasons home prices skyrocketed early in the pandemic was that demand exceeded the supply of homes for sale. At the end of February, supply remained tight at 4.1 months (123 days), down from 4.3 months (129 days) in January and well below the long-term average of five months (150 days). An increase in the number of new listings in the spring could keep prices low for longer. In the meantime, some housing experts have observed the return of bidding wars in major cities as buyers compete over a limited number of listings.

Via @JohnPasalis, real-estate bidding wars are returning to the Toronto area. The reason: Lack of new listings. "During the second week of March, 44% of houses sold for more than the seller's list price, the highest level since June 2022." https://t.co/3lnGzHxocT

- Paul Vieira (@paulvieira) March 15, 2023

5. Housing builds

The federal and provincial governments want to build new homes fast to alleviate Canada's housing shortage. How much housing do we need? Last year, the Canada Mortgage and Housing Corporation (CMHC) said we need an additional 3.5 million homes to be built by 2030 to restore affordability. That's on top of the 2.3 million housing units we were on track to build. As long as borrowing rates remain high, it will be difficult for developers to build the amount of housing needed. In February, the number of Canadian housing starts grew 13% over the previous month, after having dipped 13% in January.

6. Rents

Renters are having a tough time, too. In February, the average advertised rent in Canada was just shy of $2,000 (down slightly from November 2022). In Vancouver and Toronto, new tenants can expect to pay more than $2,500 per month for a one-bedroom apartment. The high cost of renting today gives aspiring home owners more incentive to buy, adding fuel to the housing market, while simultaneously limiting their ability to save for a home purchase.

New https://t.co/f4aeLnUpnp rent data. Price to rent a one-bedroom apartment in Toronto has broken the $2,500 barrier.

Toronto, Kitchener, Brampton, Hamilton, London, St. Catharines all with 20% year-over-year increases in listed rents. pic.twitter.com/dgO8krXPGf

- Dr. Mike P. Moffatt 🇨🇦🏅🏅 (@MikePMoffatt) March 14, 2023

7. Immigration

In late 2022, the federal government announced a plan to welcome 500,000 immigrants to Canada each year-about 25% more than usual-for the next three years. Consider the impacts this will have on housing supply and rents (above). A recent Desjardins report says we'd have to increase the amount of new housing being built by 50% nationally through 2024 to "offset the price gains from the increase in federal immigration."

Planning a spring move? Bookmark these articles

Not being able to predict the future shouldn't stop you from planning for it. If you're considering a move, the articles below will help you decide on your best course of action-whether that's buying, renting or staying put. We hope you'll come back to them often in the coming months.

Also, if you were a fan of the 2022 Where to Buy Real Estate in Canada feature, know that the 2023 edition is launching this spring.

Read more about Canadian real estate:

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What's affecting Canada's real estate and housing market? - MoneySense

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Thinking about buying or selling a home in Canada? These seven factors will shape the housing market this year. For real estate, spring is typically a busy time.

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This website communicates the outlooks of how the housing market is projected to adjust throughout 2023. Some key points from this website include the interactive maps and charts of different areas within Canada.

Something that is unique about this website is the interaction ability that you can look and manipulate any of the regions of Canada for the different informations that you are trying to look at which I found quite interesting and helpful.

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Canadian Housing Market Outlook - RE/MAX Canada News

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RE/MAX examines the Canadian housing market, national and local buying and selling trends, and prices in the country’s major housing markets.

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Canadian Housing Market Outlook

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This website communicates more information about the trends and affordability of the housing market in Canada. This information coming from a bank in Canada helps us to know that this information is reliable and also with the trends and charts on this website, we can see and compare easily to see how high the interest rates are right now compared to other years and how this is directly affecting the prices of homes.

I chose this website because I found that the charts and diagrams on this website were easy to read and interpret which makes it much easier to pull facts and stats out of it and make accurate judgements based on this information.

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Owning a home got even more expensive: Rising interest rates further inflated home ownership costs in the fourth quarter of 2022, despite a generalized dip in property values. RBC's aggregate affordability measure for Canada rose for a nineth-straight quarter to 62.8%, its worst-ever level. The situation deteriorated in all markets we track. Buyers in BC and Ontario are especially challenged.

But the pace of deterioration is slowing significantly: The increase in RBC's aggregate measure in the fourth quarter (1.4 percentage points) was the smallest in almost two years, as lower prices have started to take some of the pressure off.

Price drop, stable rates set the stage for relief-soon: The fourth quarter may prove to be the low point for ownership affordability. Further widespread price declines-particularly in Ontario and BC-should help lower ownership costs as interest rates stabilize. We expect affordability trends to improve noticeably this year-albeit only partially. Our call for a 15% peak-to-trough decline in the national RPS benchmark price would only partly reverse the more than 40% surge in the first two years of the pandemic.

Self-correction mechanism in motion

Interest rate hikes continued to dominate the housing market landscape in the latter stages of 2022, driving up ownership costs to record-high levels. They alone added 3.7 percentage points to RBC's aggregate affordability measure in the fourth quarter. But the good news is the dramatic loss of affordability since mid-2021 has set off self-correcting forces that will soon turn the situation around.

Specifically, the considerably harsher buying conditions have depressed home resale activity and sent prices on a downward trajectory. Lower property values have already had a beneficial impact on affordability in the past two quarters. So far, that impact has been insufficient to offset the toll caused by higher rates (price drops took 2.4 percentage points off RBC's aggregate measure in the fourth quarter, or just two-thirds of what high rates added). But with the Bank of Canada likely done with its rate hike campaign, we expect any further price drops to a more tangible difference for buyers. Our base case scenario has a material overall improvement taking place in 2023.

A full reversal of the massive deterioration since 2021 is poised to be a long process, though. Lower interest rates and steady solid income growth will be needed to move the needle in a meaningful way.

Very challenging environment for buyers at this stage

For now, buyers continue to face a very challenging environment in most of Canada. Affordability is at its worst-ever level in Victoria, Vancouver, Toronto, Ottawa, Montreal and Halifax in the fourth quarter where RBC's aggregate measures reached all-time highs in the fourth quarter. (An increase in the measure represents a loss of affordability.) Ownership costs are also heavier than usual in virtually every other market except possibly Edmonton. The situation deteriorated across the board once again in the fourth quarter with RBC's measures increasing the most in Saint John, Vancouver, Victoria and Montreal. The national aggregate measure is now up an astounding 21.5 basis points since late-2021.

Housing market close to a cyclical bottom

The year-long market downturn has moderated significantly since the fall as activity has reached deeply depressed levels, leaving little downside left. Home resales have never been so low since the 2008-09 global financial crisis (excluding the lockdown period). We see a bottom forming this spring. Some markets might be ahead of the pack (e.g. in Ontario and possibly Atlantic Canada), while others (e.g. in the Prairies and Quebec) might lag somewhat. Prices will level out a few months later-provided the Bank of Canada indeed keeps its fingers off the trigger (as we expect). Our latest Canadian housing market outlook report outlines our views on what's ahead for the market.

Victoria - Buyers on edge-still

Soaring interest rates put many would-be buyers on edge over the past year. The situation got even more challenging in the fourth quarter as spiking ownership costs pushed RBC's aggregate affordability measure further into record territory (74.2%). The measure has now surged an astounding 23 percentage points since the middle of 2021. It's unsurprising, then, that activity has slumped, reaching 10-year lows since the fall (excluding the pandemic lockdown). Demand-supply conditions have significantly loosened as a result and prices are now correcting. We expect further price declines in the near term.

Vancouver area - Unaffordability off the charts

Owning a home has never been so unaffordable anywhere in Canada. RBC's measure (98.1%) far exceeds everything we've recorded over the past four decades. The only encouraging sign: the measure deteriorated less in the fourth quarter, rising 2.8 percentage points or close to half the rate in the previous four quarters. That's mainly thanks to the ongoing price correction. But it will take further declines to make a meaningful difference and reignite the ownership dream of many buyers who have been shut out of the market. Home resales recently touched four-year lows. We expect activity to stay depressed while earlier price gains are partly rolled back.

Calgary - Challenged but holding up well

The broader challenging trends have also impacted the Calgary market though the affordability situation still isn't as dire as in some other major markets. Despite rising materially in the past year, RBC's aggregate measure (43.2%) exceeds its long-term average (38.8%) only moderately-suggesting ownership costs aren't yet overwhelming buyers. That's likely the reason why market activity has remained relatively brisk to date, still running above pre-pandemic levels. Prices have stayed firm as well with any declines minimal. We see this continuing in the near term.

Edmonton - Standing out

Edmonton stands out as the only market we track where RBC's affordability measure (32.3%) is below its long-run average (32.6%). While the relatively positive picture hasn't protected against the broad market cooling, it likely helped home resales stay 18% above pre-pandemic levels. A string of price declines since summer, if sustained, could lead to some improvement in affordability in the period ahead.

Saskatoon - Still robust despite rising ownership costs

RBC's aggregate measure rose in each of the last seven quarters to 34.5%. This erosion in affordability has taken a toll on buyers and slowed down activity in the area. But with sky-high levels as a starting point, the market isn't weak by any measure-resales remain far above where they were before the pandemic. Prices have generally held up better than in most markets. We've seen some depreciation in property values of late, which could ultimately help improve affordability down the road.

Regina - Funk may be short-lived

The loss of affordability in the past year is now weighing on buyers. Home resales have dipped since the fall after hovering near record levels in the prior two years. Still, the downturn to date pales in comparison to what the majority of markets in Canada are experiencing. And it may soon stabilize. Recent price declines herald better days ahead for buyers. Already the best among the markets we track in Western Canada, RBC's aggregate measure for Regina (29.2%) could start to get better again in period ahead.

Winnipeg - Better affordability likely around the corner

The market's pace has cooled considerably in the past half-year with resales slumping to a decade low early in 2023. Soaring interest rates are largely to blame. They, along with earlier price gains, have significantly jacked up ownership costs, putting Winnipeg buyers in their tightest squeeze in decades. RBC's aggregate measure rose for an eighth-straight time to 33.5%-a 33-year high-in the fourth quarter. The latest increase was tiny (at 0.3 percentage points), though, which hints that some improvement may be around the corner. With prices continuing to decline for now, we expect just that.

Toronto area - Massive challenges persist

The market is in the midst of a full-blown affordability crisis. Average buyers would need to spend a record 85.9% of their income to carry the costs of owning a typical home (valued at $1.2 million in the fourth quarter). Even settling for a condo apartment-usually the cheapest option-would set buyers back a mind-boggling 51.3%. This puts ownership out of reach for many at a time when rent is also skyrocketing. Price declines in the past year have yet to bring relief because rising interest rates more than offset their beneficial impact. This may change in the period ahead as the Bank of Canada pauses. Resale activity appears to be stabilizing (at depressed levels), which we think signals the cyclical bottom is near.

Ottawa - Buyers on the defensive

Ottawa has lost its favourable affordability position. Surging ownership costs over the last two years now weigh heavily on buyers. They would take up 52.7% of a typical household's income-an all-time high in this market, and ranking fifth highest among the markets we track. With buyers clearly on the defensive, resale activity has plummeted to a 14 year-low range since summer (excluding the pandemic lockdown). Property values have moderated but not enough so far to make a meaningful difference. We expect some improvement in the period ahead with declining prices taking the edge off ownership costs as rates plateau.

Montreal area - Peak unaffordability pressure

The pressure has never been more intense for Montreal buyers. Following a rapid escalation since the middle of 2021, RBC's aggregate measure now stands near its highest level ever (54.0%), effectively matching the previous historical peak set in 1990. The very high bar to ownership has unsurprisingly deflated buyers. The slowdown in market activity began gradually but the pace of decline picked up materially since summer. Home resales have lately slumped to 14-year lows. Because inventories are still relatively tight and demand-supply conditions largely balanced, the drop in property values has been relatively contained to date. We think this trend will persist in the near term.

Quebec City - Ownership dreams still alive

Owning a home has become more expensive but still within reach of average Quebec City-area buyers. RBC's aggregate measure (32.4%) just modestly exceeds its long-run average (29.1%) and remains close to half the Canadian average (62.8%). Still, the sizable deterioration over the past year has led many buyers to withdraw, cooling activity by several degrees and curbing price appreciation.

Saint John - Not immune to the general cooling trend

After showing resilience at first, the Saint John market has succumbed to the general cooling brought about by higher interest rates. Home resales recently fell to a five-year low (excluding the pandemic lockdown). Local buyers have seen their capacity to carry ownership costs diminish considerably over the past year and a half. RBC's aggregate measure shot up nearly 11 percentage points since mid-2021 to 32.9% in the fourth quarter-just shy of the historical peak of 33.9% reached in 1990. The more challenging affordability conditions clearly contributed to the slowdown in activity. But so has declining supply. New listings were recently running 33% below year-ago levels. The end result: sustained market tightness and minimal price declines.

Halifax - Harsher reality sets in

The harsher reality has caught up with the Halifax market. After a highly favourable affordability position attracted a record number of buyers early in the pandemic, soaring ownership costs since then have poured buckets of icy water on demand. Home resales recently slumped to a seven-year low point. The Bank of Canada's aggressive interest rate hike campaign along with an earlier spike in property values propelled RBC's aggregate measure 17.8 percentage points since the start of 2021 to an all-time high of 45.1% in the fourth quarter. Benchmark prices peaked last summer and we expect them to trend lower in the period ahead.

St. John's - Losing some of its luster

The market is proving to be among the most resilient during the downturn, maintaining solid resales momentum and sustaining very limited losses in property values. A run-up in in-migration no doubt has continued to fuel demand. Still, eroding affordability has turned down the market's dial a few notches since summer. Activity has moderated from historically elevated levels. RBC's aggregate measure rose 6.2 percentage points in the past year to 28.4% in the fourth quarter-slightly above its long-run average (25.8%). While still the most affordable of the markets we track, St. John's also has lost some of its luster.

Read the full Housing Trends and Affordability report for extensive market-by-market analysis.

Disclaimer

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Brighter days ahead as home ownership costs go through the roof - RBC Thought Leadership

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Owning a home got even more expensive: Rising interest rates further inflated home ownership costs in the fourth quarter of 2022, despite a generalized dip in property values. RBC's aggregate affordability measure for Canada rose for a nineth-straight quarter to 62.8%, its worst-ever level. The situation deteriorated in all markets we track.

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This video discusses how the housing market could be viewed from the bank's prospective and something that I took away was how it would negatively affect the banks if people are unable to afford the high prices of their homes so the bank gains the keys to a home that is extremely "overvalued".

I chose this video because I believe it is important to consider many different stances on these issues, including a group as powerful as the banks.

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Economist's warning | Canada's housing market "really overvalued"

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This video reveals a different point of view again that discusses how many real estate experts are believing that the home prices in Canada will drop again. Just about a year ago, the houses were delving into bidding wars and deep issues with houses selling extremely fast and for far more than they were listed for. Currently, houses are staying on the market longer and they are not selling for as far over asking price as they were not long ago.

I chose this video because it is nice to see a different view that a lot of real estate experts believe could be expecting to happen. With that, this is yet another projection based on trends that people are trying to make educated guesses about.

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Canadian Home Prices Will Drop Again in 2023.. 88% Of Experts Believe

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This website directly is communicating about the prices and the price increase of homes over the past 10 years (approximately). This website also has charts that help to understand the trends and the rise and fall of the housing prices over the years. In 2022, the prices were highest they've been in the last 10 years.

I chose this website because it talks about the different types of housing. Apartments, single-storey, double-storey, and townhouses. I found that this was unique because most other sites just talk about one type of house, or they generalize all housing types together.

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House prices in Canada's eleven major cities rose by a modest 2.51% during 2018 (0.51% inflation-adjusted).

This is a sharp slowdown from last year´s 8.92% rise. And in the last quarter of 2018, house prices fell 0.95% (-0.73% inflation-adjusted), against the backdrop of rising interest rates and a slowing economy.

Demand is now falling. Construction is weakening. Sales plunged 19% in December 2018 from a year earlier, according to the Canadian Real Estate Association (CREA).

According to CREA:

Apartment prices posted year-on-year gains of 4.85% - but last year they rose 19.68%!

Townhouses/row houses rose 3.06% - but last year they rose 12.07%!

The average price of a one-storey single family home fell 0.27%, while two-storey homes rose 0.39%.

Victoria's house prices recorded the biggest year-on-year rise of 5.95% during 2018, followed by Ottawa (5.87%), Hamilton (4.4%), Montreal (4.37%), Toronto (3.72%) and Vancouver (1.41%).

There were house price falls in Calgary (-2.64%), Edmonton (-1.87%), Winnipeg (-0.49%), Quebec (-0.14%) and Halifax (-0.04%).

The central bank has taken action repeatedly - raising mortgage downpayment requirements and reducing amortization periods - but till now, prices spiralled up. However January 2018´s squeeze is proving effective. House price rises are decelerating sharply.

"While economic and demographic fundamentals remain supportive for housing demand in many parts of the country, policy headwinds together with rising interest rates are limiting access to mortgage financing and negatively impacting homebuyer sentiment," said CREA.

The Canadian economy expanded by 2.1% in 2018, a slowdown from the preceding year's 3% growth, mainly due to its ailing oil and gas industry. Bank of Canada expects economic growth to slow further to 1.7% this year before partially rebounding to 2.1% in 2020.

There are virtually no restrictions on foreigners buying properties in Canada.

A long and steady boom

Canada escaped the major post-2008 collapse in house prices which took place in Europe and the U.S. But the situation looks worrying. House prices have risen almost continuously for 16 years:

From Q1 2000 to Q1 2009, house prices rose by 79% (49% inflation-adjusted), due to low interest rates and economic growth.

From Q2 2009 to Q3 2012, house prices increased by another 24% (17% inflation-adjusted), despite government efforts to cool the housing market.

From Q4 2012 to Q4 2015, tighter mortgage rules implemented in July 2012 helped calm the market, but house prices still rose by around 15.7% (10.8% inflation-adjusted).

From 2016 to 2017, house prices surged by 22.5% (18.5% inflation-adjusted).

However there are signs that the great Canadian house price boom is coming to an end, after repeated moves to tighten mortgage lending. House price rises are now decelerating sharply, amidst falling demand and slowing construction activity.

House price rises and demand now slowing

House price rises are expected to continue to slow this year. The national average price is forecast to increase slightly by 1.7% y-o-y to CA$496,800 (US$373,885) in 2019 from a year earlier, according to CREA's Quarterly Forecasts.

However, there are significant regional variations:

Ontario is expected to post the biggest annual rise in house prices of 3.3% during 2019, to an average of CA$588,900 (US$443,198).

House prices are also expected to increase modestly by 3% in New Brunswick, 2.9% in Quebec, by 2.4% in Nova Scotia and by 1.6% in Prince Edward Island.

House prices in British Columbia and Manitoba are projected to increase by a meagre 0.9% this year, at CA$720,000 (US$541,863) and CA$293,300 (US$220,734), respectively.

In contrast, Saskatchewan is expected to register the biggest y-o-y decline in house prices of 3.5% this year, to an average of CA$276,900 (US$208,391), followed by Newfoundland (-3.4%) and Alberta (-2.5%).

Home sales falling

In December 2018, actual sales activity plunged by 19% from a year earlier, according to CREA, led overwhelmingly by lower activity in Lower Mainland of British Columbia, the Okanagan region, Calgary, Edmonton, the Greater Toronto Area and Hamilton-Burlington.

The sales decline was partly due to the elevated activity in the previous year as homebuyers rushed to purchase in advance of the new federal mortgage stress test that became effective on January 1, 2018.

Newfoundland is forecast to see the largest decline in sales in 2019 at 7.1%, followed by British Columbia (-5.2%), Nova Scotia (-4.3%) and Alberta (-3.2%). Home sales are expected to fall less in Saskatchewan (-2.5%), Prince Edward Island (-2%) and Manitoba (-0.7%). On the other hand, sales activity is expected to increase modestly in New Brunswick (3.2%), Quebec (2.2%), and Ontario (1.4%).

"National sales are forecast to remain little changed in 2019 (456,200 units; -0.5%), as rising interest rates combined with the mortgage stress-test offsets continuing population, job and income growth," said CREA.

Residential construction activity weakening

Dwelling starts fell by 3.1% to 212,843 units in 2018 from a year earlier, according to CMHC.

By property type:

Apartments: up 9.6% y-o-y in 2018 to 112,401 units

Single family homes: down 14.2% y-o-y to 65,940 units

Semi-detached houses: down 10.6% y-o-y to 10,992 units

Row houses: down 16.2% y-o-y to 23,510 units

On the other hand, dwelling completions increased 4.9% y-o-y to 200,262 units last year.

Ontario accounted for about 37% of all dwelling starts in Canada in 2018, followed by Quebec (22%) and British Columbia (19%), according to CMHC's recent report.

Mortgage interest rates are rising

Mortgage interest rates are now rising gradually in Canada.

Interest rates on 1-year mortgages averaged 3.64% in January 2019, up from 3.34% a year earlier and 3.14% two years ago.

Interest rates on 3-year mortgages averaged 4.29% in January 2019, up from 4.15% in January 2018 and 3.39% in January 2017.

Interest rates on 5-year mortgages averaged 5.34% in January 2019, up from 5.14% a year earlier and 4.64% two years ago.

In October 2018, the central bank raised its key rate by 25 basis points to 1.75%, the fifth consecutive rate hike since July 2017, in an effort to keep the economy from overheating and curb inflationary pressures. The key rate had been raised by 25 basis points each in July 2017, September 2017, January 2018, and July 2018.

Despite this, the mortgage market continues to expand. In November 2018, the amount of residential mortgage debt outstanding rose by 3.2% to CA$1.54 trillion (US$1.16 trillion) from a year earlier, according to Statistics Canada. The size of the mortgage market expanded strongly in recent years, rising from 39.8% of GDP in 2000, to 54.2% of GDP in 2008, to 63.3% of GDP in 2014 and finally to about 69% of GDP in 2018.

New market cooling measures

In October 2017, the Office of the Superintendent of Financial Institutions (OSFI) introduced another set of cooling measures targeting borrowers in the uninsured mortgage market, requiring lenders to test borrowers' ability to pay higher interest rate than the one they have actually been offered, to test their creditworthiness if borrowing costs rise.

The new measures, which came into effect on January 1, 2018, apply to all federally regulated financial institutions.

OSFI is setting a new minimum qualifying rate, or "stress test," for uninsured mortgages. The minimum qualifying rate is now the five-year benchmark rate published by the Bank of Canadaor the contractual mortgage rate +2%, whichever is higher.

OSFI is requiring lenders to enhance their loan-to-value (LTV) measurement and limits so they will be dynamic and responsive to risk.

OSFI is placing restrictions on certain lending arrangements that are designed to circumvent LTV limits.

The new stress test requirement disqualifies about one in every five potential buyers, reducing property demand, according to a survey conducted by the Mortgage Professionals Canada.

This followed measures introduced in 2016 to discourage speculation:

From August 2, 2016, foreign nationals and foreign-controlled companies were required to pay 15% in additional property transfer tax on residential property transfers in Greater Vancouver. A 15% tax is equivalent to around CA$300,000 on the sale of a CA$2 million home.

From October 17, 2016 homebuyers who made greater than 20% down payments, faced the same insurance requirements as those with lower down payments.

While any financial gain from selling a primary residence remains tax-free, the government now requires sellers to report the sale at tax time to the Canada Revenue Agency.

The government has also launched consultations on limiting the government´s financial obligations in the event of widespread mortgage defaults.

Other market-tightening measures date back to July 2012, with a significant ratcheting-up of pressure in 2013 and 2014. Till this year none of these measures had much effect.

Rents rising modestly, rental yields remain healthy

Gross rental yields in Montreal remain healthy, ranging from 4% to 6% in early 2018, according to Global Property Guide research. A small apartment of 60 sq. m. in Montreal offers a return of around 6%. In this low-return era, in a low-risk country such as Canada, that is a really acceptable, not to say enticing, yield. Even on a largish 120 sq. m. apartment in Montreal, one can likely earn a gross rental return of 4.5%.

In Toronto, rental yields are lower, which range from 3.5% to 5.3% in early 2018.

Average rents in Canada rose by 3.4% to CA$987 per month (US$743) during the year to October 2018, according to the CMHC. British Columbia had the highest rent increase, up by 6.1%, followed by Ontario (4.8%), and Manitoba (3.9%). More modest rent rises were seen in New Brunswick (3%), Prince Edward Island (2.9%), Quebec (2.4%), Nova Scotia (1.9%), Alberta (1.6%), and Newfoundland and Labrador (1.2%).

Vancouver had the highest average monthly rent for two bedroom apartments of CA$1,649 (US$1,242) in October 2018, followed by Toronto with monthly rent of CA$1,467 (US$1,105) and Calgary with monthly rent of CA$1,272 (US$958). Trois-Rivières, Saguenay, and Sherbrooke - all Quebec centres - registered the lowest monthly rents in October 2018 of CA$601 (US$452), CA$608 (US$458) and CA$639 (US$481), respectively.

Vacancy rates are falling

The national vacancy rate was 2.4% in 2018, down from 3% in 2017, 3.7% in 2016 and 3.5% in 2015, according to the CMHC. It is considered very low by international standards. Because of skyrocketing house prices in recent years, an increasing number of Canadians have no choice but to rent.

In 2018:

Bachelor-type: 2.9%, down from 3.5% a year earlier

One-bedroom: 2.4%, down from 2.9% a year earlier

Two-bedroom: 2.4%, down from 3% a year earlier

Three-bedroom: 1.8%, down from 3% a year ago

"The decrease in the vacancy rate was attributable in part to the strong increase in international migration," said Ale dab Iorwerth, the deputy chief economist of CMHC. "This factor, combined with the growth in youth employment and the aging of the population, drove up demand for rental housing."

Prince Edward Island had the lowest vacancy rate in Canada of just 0.3% in 2018, followed by British Columbia (1.4%), Ontario (1.8%), Nova Scotia (2%), and Quebec (2.3%). On the other hand, Saskatchewan had the highest vacancy rate, at 8.7% in 2018, followed by Newfoundland and Labrador (6%), Alberta (5.5%%), and New Brunswick (3.2%).

Oilpatch woes adversely affecting the Canadian economy

The Canadian economy was estimated to have expanded by 2.1% in 2018, a deceleration from the preceding year's 3% growth, mainly due to the slowing oil and gas industry.

"Here in Canada, lower oil prices have reached the point where they will have material consequences for our macroeconomic outlook," said Bank of Canada governor Stephen Poloz.

Canada's oil industry accounts for about 10% of the country's GDP. Canada has the world's third largest oil reserves and is the world's fifth largest oil producer and fourth largest oil exporter.

Oil price gap between Canadian crude and US benchmarks hit new records in October 2018, topping US$50 per barrel, mainly due to rising oil production, export bottlenecks and American refinery maintenance. In an effort to clear the oil glut, Alberta, Canada's largest oil producing province, began to enforce mandatory production cuts on its largest oil producers in January 2019.

Bank of Canada expects that the country's economic growth will slow further to 1.7% this year before partially rebounding to 2.1% in 2020.

The government has increased spending on infrastructure, cut some taxes, and increased child benefits, among others.

The downside is that the budget deficit is now swelling. For the 2019-20 fiscal year, the Canadian government is projected to post a deficit of CA$19.6 billion (US$14.8 billion), sharply up from a deficit of just CA$1 billion (US$754 million) four years ago. The federal government has run deficits every year since 2015, despite continued economic growth.

In November 2018, government debt stood at CA$671.7 billion (US$506.7 billion), up 4.8% from a year earlier, according to Statistics Canada.

The country's annual inflation rate stood at 2% in December 2018, up from 1.9% a year earlier, as higher food and phone services costs offset lower gasoline prices, according to Statistics Canada. For the whole year of 2018, inflation accelerated to 2.3%, up from 1.6% in 2017 and the highest level in seven years.

In January 2019, the nationwide unemployment was 5.8%, up from 5.6% in the previous month but down from 5.9% a year earlier. British Columbia had the lowest jobless rate of 4.7%, followed by Quebec (5.4%), Manitoba (5.5%), Saskatchewan (5.5%) and Ontario (5.7%). Newfoundland and Labrador had the highest jobless rates in January 2019, at 11.4%.

An influx of immigrants buoys property demand

In an effort to fill the gap left by retiring baby boomers, Canada liberalized its immigration regulations in 2015. As a result, Canada took in more than 323,000 immigrants in the 2015-16 fiscal year, the largest number since 1910, according to Statistics Canada. During the latest fiscal year, the Canadian government targets to accept about 310,000 immigrants, after admitting about 273,000 immigrants in FY 2016-17 and 303,000 immigrants in FY 2017-18.

In November 2017, Canada's Minister of Immigration, Refugees and Citizenship Ahmed Hussen unveiled the government's plan to let a million new immigrants over the succeeding three years, in an effort to fulfill the country's economic needs. The plan, dubbed as "Growing Canada's Economic Future", aims to increase the number of new immigrants to 310,000 in 2018, 330,000 in 2019, and 340,000 in 2020.

"This historic multi-year immigration levels plan will benefit all Canadians because immigrants will contribute their talents to support our economic growth and innovation, helping to keep our country at the forefront of the global economy," said Hussen.

In October 2018, the government unveiled an updated multi-year immigration plan that includes a target of about 350,000 new immigrants in 2021, which is nearly 1% of its population.

About five million Canadians are set to retire by 2035.

"Nothing is going to impact this country besides increased automation and technology more than immigration will and this impact will grow in response to declining birth rate, aging population and accelerated retirements," said Chris Friesen, director of the Canadian Immigrant Settlement Sector Alliance.

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Sources:

Bank of Canada maintains overnight rate target at 1 ¾ percent(Bank of Canada): https://www.bankofcanada.ca/2019/01/fad-press-release-2019-01-09/

Monetary Policy Report - January 2019(Bank of Canada): https://www.bankofcanada.ca/2019/01/mpr-2019-01-09/

Housing Market Information Portal(Canada Mortgage and Housing Association): https://www03.cmhc-schl.gc.ca/hmip-pimh/en#Profile/1/1/Canada

Canadian home sales fall further in December(Canadian Real Estate Association): http://creastats.crea.ca/natl/

CREA Updates Resale Housing Market Forecast (Canadian Real Estate Association): https://www.crea.ca/housing-market-stats/quarterly-forecasts/

Canada to increase annual immigration admissions to 350,000 by 2021 (CBC): https://www.cbc.ca/news/politics/canada-immigration-increase-350000-1.4886546

Oilpatch woes impacting Canadian economy, central bank says (CBC): https://www.cbc.ca/news/canada/calgary/poloz-oil-canadian-economy-1.4971534

Rental returns in Montreal outpace those in other Canadian cities (Global Property Guide): https://www.globalpropertyguide.com/North-America/Canada/Rental-Yields

World Economic Outlook Database October 2018 (International Monetary Fund): https://www.imf.org/external/pubs/ft/weo/2018/02/weodata/index.aspx

Table 5 Labour force characteristics by province, age group and sex, seasonally adjusted (Quebec, Ontario, Manitoba, Saskatchewan, Alberta, and British Columbia) (Statistics Canada): https://www150.statcan.gc.ca/n1/daily-quotidien/190208/t005a-eng.htm

Estimates of the components of international migration, by age and sex, annual(Statistics Canada): https://www150.statcan.gc.ca/t1/tbl1/en/cv.action?pid=1710001401

Home prices trended down in the second half of 2018 (Teranet-National Bank of Canada): https://housepriceindex.ca/2019/01/december2018/

House Price Index (Teranet-National Bank of Canada): https://housepriceindex.ca/#maps=c11

Canada Inflation Unexpectedly Accelerated in December (The Wall Street Journal): https://www.wsj.com/articles/canada-inflation-unexpectedly-accelerated-in-december-11547820577

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Is Canada's amazing house price boom coming to an end?

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House prices in Canada's eleven major cities rose by a modest 2.51% during 2018 (0.51% inflation-adjusted). This is a sharp slowdown from last year´s 8.92% rise. And in the last quarter of 2018, house prices fell 0.95% (-0.73% inflation-adjusted), against the backdrop of rising interest rates and a slowing economy.

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1. What did you learn that surprised you most about this topic?
Something that surprised me the most was how the house prices have increased but they are now titling the homes as overvalued. From what I understood before is that there was more of an increase in value in homes, however it is just the price and not the value that increased.
2. Provide a real life example of how this topic is relevant for you.
This topic is interesting to me because my boyfriend and I are hoping to buy a house fairly soon after I graduate and with the way the some real estate experts are suspecting that the housing prices will be decreasing this year, this is good news for us.
3. What is the most important thing you learned that you would pass on to a family member or friend?
Something that I believe would be important to pass along to a family member or friend would be that the housing market is always going to rise and fall throughout the years and so it is important to do research on the trends and current trends when considering when it would be a good time to buy or when it would be a good time to sell.