With just a few weeks remaining in the final quarter of 2018, it’s time to consider how the Canadian housing market is faring as we speed towards 2019.

After a warmer period in the summer and early fall, the market seems to be entering a cooler patch, as higher interest rates weigh on some of the country’s hottest markets.

For a closer look at what the final three months of the year will look like for the Canadian housing market, Livabl has rounded up the latest expert commentary, to keep you in the know.

National price growth is slipping

Canada continued its downward slide in global price rankings last quarter, falling to number 44 on property consultancy Knight Frank’s 57-city price index.

The report cited the the introduction of foreign-buyer taxes in BC and Ontario, stricter mortgage qualification rules and rising interest rates as factors in the country’s falling status.

“Of those countries where a rate rise has taken place in 2018, a number have a significant gap between their strongest and weakest performing city,” reads a Knight Frank release from last quarter.

Of course, the cooling activity numbers are music to the ears of policy makers, who were hoping that a new mortgage stress test and foreign-buyer taxes would help to balance the formerly red hot Toronto and Vancouver markets.

The Toronto market is cooling

November brought another month of falling home sales to the Toronto housing market. Sales were down 14.7 percent year-over-year, while dipping 3.4 percent month-over-month.
But, as sales flag, listings are also down, creating a slight upward pressure on home prices. The average selling price of a Toronto region home was up 3.5 percent year-over-year to $788,345, while condo prices jumped 7.5 percent.

“Home types with lower average price points have been associated with stronger rates of price growth over the past few months,” writes Jason Mercer, the Toronto Real Estate Board director of market analysis, in a statement.

Mercer believes the strength of the Toronto condo market lies in the city’s deteriorating affordability — more and more buyers are considering the less pricey housing type, after being pushed out of the expensive low-rise market.

Household debt levels might mean a delay in interest rate hikes

Steadily rising interest rates have been on the Bank of Canada’s agenda for months, but high household debt levels might cause the Bank to reconsider its next hike, according to Stephen Brown, senior Canada economist at Capital Economics.

“Households are even more vulnerable to higher interest rate(s) than we had previously thought,” writes Brown, in his most recent note. “In that environment, the Bank of Canada’s plan to raise interest rates repeatedly could be a serious policy mistake.”

Brown is referring to data released by Statistics Canada, which found that Canadians’ savings rate dropped to just 1.4 percent of their incomes in 2018, the lowest level in over 10 years.

The low number — which suggests that Canadian households could be in a vulnerable position when it comes to their debt loads — may mean the BoC holds off on its next rate hike.
“The Bank will ultimately be forced to reverse course next year, [and reduce rates],” he concludes.