The expectation in 2017 was for Canada’s real estate market to crash. Some even pointed to dips in activity and the rise in the number of listings as a signal that the crash was starting. But it was a short-lived blip. Now, the focus is on predicting the outlook for Canada’s housing market in 2018.
Given the decline in the number of transactions and the reduced selling activity, particularly in the country’s two hottest markets, this prediction of market slowing was accurate. But Canada’s housing market didn’t crash. According to preliminary year-end statistics from the Canadian Real Estate Association (CREA), housing prices across the country dropped by an average of 10%. While this small dip in prices meant anxiety in the biggest real estate centres—Vancouver area and the Greater Toronto Area (GTA)—most provinces remain optimistic. The general take is that the market softening is a sign of a market correction, not a housing market crash.
No one has a crystal ball to determine where the real estate market is headed in 2018. However, there are some esteemed industry experts, home appraisers, who can help us prepare for what is to come based on market trends, regulation impacts and whether we’ll see a balanced Canadian housing market in 2018.
What do home appraisers expect in 2018?
Many home appraisers are looking forward to some steady and balanced markets in Canada from coast-to-coast. Some say it’s best to wait until January or February to gain further insight on trends, whereas others are more certain of where they think the market will go in the New Year.
“It’s typically been very steady even throughout the winter months here,” explains Deana Halladay, a home appraiser in Winnipeg, Manitoba. “I sense that we may see a little bit more of a slow down in 2018.” However, Halladay believes that a small slow down will likely not affect pricing. Agnes Lee, an AIC-licensed residential and commercial appraiser in the Greater Toronto Area (GTA), holds a similar mindset as far as overall property values.
“I don’t expect a lot of changes in terms of demand and pricing,” said Lee. “It will be a stabilizing year, which is a good thing and a healthy thing for the market.”
Real estate outlook 2018:
Ontario’s housing market
Lee believes that 2018 will make for a “very interesting year.” She adds that in her conversations with local realtors, “they have been telling me that things are slow, but people are still interested in buying.”
It’s a “wait-and-see” approach, says Lee. If anything, she sees demand shifting to more affordable housing types, meaning interest in multi-family properties and condominium units will increase in 2018 in most Ontario housing markets.
Real estate outlook 2018:
East Coast’s housing market
Further east, things are slow and showing little sign of increase—whereas Ontario and surrounding provinces are still thriving.
“The biggest concern is the instability of our economy going forward,” said Jerry Kirkland, an AIC-licensed home appraiser in St. John’s, Newfoundland. “Uncertainty is quite significant here in the St. John’s area, and that is going to be reflected in the 2018 market and our real estate market.”
Kirkland says the entry-level market is good. However, the upper-end market, which in St. John’s, sits at the $500,000 mark has been hit the hardest regarding residential.
Real estate outlook 2018:
The Prairies’ housing market
Out west in provinces such as Manitoba, B.C. and Alberta things are steady.
“We’re looking at a fairly stable market right now,” said Halladay. “I don’t see any big indications that it’s going to change a whole lot.”
Supply seems to be a problem for most western provinces, as they either have too much or not enough. Halladay says the condominium market, although seeing some action, is oversaturated to the point that they are over seven months ahead of the market need.
Real estate outlook 2018:
B.C.’s housing market
While the Prairie provinces may have too much supply, particularly of condo-units, B.C. stands in stark contrast. Homeowners in the Vancouver area are in dire need of more supply—of single-family homes as well as multi-family units—and cannot seem to find it.
“Demand is certainly outserving supply,” said Leigh Walker, a home appraiser in Vancouver, B.C. “That’s been the story for a certain number of years now.”
Walker predicts a moderate year with only minor ups and downs. Expect increases and decreases to continue in their respective areas throughout 2018, with only minor ups and downs of about 5% either way. Overall, he says, things look healthy and balanced for the 2018 market.
What impact will the new regulations have on the market?
Starting January 1, 2018, regulation changes, such as the new rules for the mortgage stress test, will be in play. It’s a worry for many Canadians who have yet to enter the home ownership world and even home appraisers think this new mortgage rule will have an impact on the market.
“With these regulation changes, many are waiting to see what kind of impact this will have on the market,” said Lee. Those that aren’t waiting are changing their strategy. “Instead of buying the more expensive homes, they’re scaling down to something more affordable.”
Lee doesn’t think the new regulation changes will have a significant impact on buying activity, even with more buyers being displaced to the sidelines. As a result, Lee predicts the impact of the mortgage stress test will put upward pressure on the condominium market, particularly in hotter real estate markets like in the GTA.
“I understand the logic of why our government is trying to cool down certain markets, but the problem is that it’s a national decision,” said Kirkland. “It throws cold water on a fire that’s already out in all but a few select markets in Canada.”
While Kirkland agrees with the intentions to cool hot markets, he doesn’t believe it’s great news for the province of Newfoundland or for smaller cities across Canada.
Overall, the outlook for Canada’s housing market in 2018 is that many people will have to reevaluate their thoughts on what type of home they want and what type of home they can afford. “People that qualify for a conventional mortgage are not going to be in the same price range anymore with that stress test,” said Halladay. “But I don’t know if it will take them out of the market, rather they may have to shift their focus a little bit.”
Where are buyers headed in 2018?
Although it doesn’t seem new regulations are going to take many future homeowners out of the game, it does seem that their intent to buy property will be much different than originally predicted. With most cities outside of Toronto and Vancouver typically leading buyers to single-family homes, some are seeing an increase in desire for multi-family properties instead. One example of this is the oversaturated condominium market in Winnipeg, which gives potential buyers bargaining power and a lot of selection.
Another unintended consequence leading up to the country-wide implementation of the new stress test is in new home developments in larger cities. Lee noticed that in some areas of the city smaller developers appear to have gone quiet. She assumes these smaller construction deals have left the market in anticipation of slower demand for new-build single-family homes—homes that often carry the largest list prices. “That’s a good thing because it leaves a lot less speculation in the market,” says Lee.
Whether buyers choose to search for single-family or multi-family homes in 2018, the bottom line is that they will still be looking. All five of the home appraisers were certain that although there will be some small changes and moments of adjustment, overall the market will be balanced and healthy for both buyers and sellers across Canada.