Housing market easing on the mortgage front
Steve Randall
REP
The acute volatility of the Canadian housing market may be nearing the end.
The downturn in existing home sales in 2018, following a jump as the mortgage stress tests approached, have produced some dramatic declines but TD Economics believes things are easing.
“Fortunately, there is reason to believe that the worst of the adjustment is behind us. Monthly moves have become less dramatic, with some markets beginning to see modest increases,” a new multi-authored report says.
However, it will most likely be the third quarter of 2018 before the housing market reaches a “convincing bottom” the report says.
After that, the economists at TD see little chance of a significant resurgence due to rising interest rates, tighter mortgage rules, and weakened affordability.
With the Bank of Canada unlikely to introduce sharp rate rises, the TD Economics team expects a “gradual, well-telegraphed” tightening of monetary policy.
Households feeling the pinch of rate rises The report also highlights the pain that many Canadians are feeling from higher borrowing costs.
Canadian households are 30% more sensitive to rising borrowing costs than a decade ago. This is due to the level of household debt.
This is likely to mean a continued moderation of discretionary household spending, especially as oil and gas prices are trending higher.
Copyright © 2018 Key Media Pty Ltd
