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December 29, 2016

Canadian Real Estate Industry – Looking Forward to 2017

Despite what was a rocky 2016 start, the Canadian real estate market wasn’t displaying major signs of any slump in growth until recently. According to the Canadian Real Estate Association’s (CREA), new mortgage qualification rules have now been effective for one month, and the impact is already being felt across the homes markets in the country. From October to November alone, national home sales recorded by real estate agents have already dipped by 5 per cent.

What has been shaping the homes market as the year closes and 2017 looms?

Global Markets Impact

Realtor services and real estate agents are doing booming business in British Columbia, particularly Vancouver, while other Canadian areas are slowing climbing out of the recent economic downturn. For example, Calgary after years of population growth now has a more diversified economy with great real estate growth potential. St. John and Edmonton are benefiting from several capital investments projects that include infrastructure and continued oil industry investments.

Housing Markets

In the Canadian housing markets that are experiencing prices softening, homes construction is also showing signs of slowing down in order to align with the falling demand. This is projected to stabilize as the growth rate of the population catches up to existing inventory levels. For instance, Canada, according to the 2016 Spring Market Trends Report is on track towards welcoming a massive 300,000 new permanent residents: the highest figure recorded since 1913.

Condos vs. Town Houses

If condos typically represent the bigger end in terms of the affordability scale, townhomes lie somewhere towards the middle. According to the September Housing Market reports of the Toronto Real Estate Board, townhouses remain considerably pricier compared to the average condo unit.

There are also far fewer town homes available: compared to 1,787 condos units sold in September of this year, only 387 townhouses got sold. If you are thinking of a townhouse, be ready to spend more due to more competition.

Borrowing Costs

Mortgage rates can’t get much lower! The low oil price has been a key contributor to muted costs of borrowing. Mortgage rates for Canadians are currently very affordable which makes it easier than ever before for lots of many new home-buyers. This is particularly true for the smaller markets outside Montreal, Toronto and Vancouver.

In October, the Government introduced steeper mortgage qualifications requiring high-ratio mortgage borrowers to qualify at the benchmark rate of 4.64% set by the Bank of Canada – in some cases this being double the available contract rates on the market. This is expected to put some brakes on growth, especially at the lower market end.


This anticipated Canadian homes sales slowdown is likely to further dampen economic growth as 2017 rolls in. This is because housing activity generally generates much spin-off spending and any weakened prospects may not auger well for economic growth in the country.

Although the Bank of Canada seems to have taken a more cautious approach in terms of interest rates, higher American rates (following the recent US Federal Reserve hike) have the potential of leading to a stronger US dollar, in turn which could soften the Loonie, and for Canadians, a higher overall cost.

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