Last year, the big question on the minds of home buyers and sellers was whether the Canadian real estate market was a bubble that was ready to burst. But here we are in 2018, with no crash in sight – neither is there one likely to be on the horizon any time soon. Rather, we started off the year with a rather flat market.
Because of stricter mortgage regulations that were announced last October, borrowers aren’t able to qualify for the same loans they could a few months ago. This, along with the Bank of Canada’s recent announcement that it was raising interest rates served to slow down the housing market considerably.
Real estate sales representative Mark Adelson of Toronto’s Adelson & Weiss Team at Harvey Kalles Real Estate Ltd., believes this flattening of the market will continue for a few months while both buyers and sellers adjust to the new regulations. “With the economy getting stronger, interest rates increasing and new rules limiting the borrowing ability of potential buyers, I feel the market will be quite flat in the first quarter,” said Adelson.
In the second quarter of the year, however Adelson expects the market to heat up. “As we enter the second quarter and potential purchasers have a better grasp of all the changes that challenged them in the past 6-9 months, we will see the spring market warm up, but not enough to send us back to the crazy bidding wars of the past.”
Adelson’s partner, Brandon Weiss agrees. “In my opinion, we will see a slow start to the 2018 real estate market similar to each time over the last three years that the government has intervened. Late spring, I feel you’ll start seeing more action as people get more comfortable or have adjusted their strategy.”
Is 2018 the Year of the Condo?
As buyers find themselves with less purchasing power due to new regulations, one of the outcomes may be that there is more competition for less expensive properties such of condominiums. Mark Adelson believes a price increase is on the way both for those who wish to purchase condos as well as in the rental market. “With inventory lagging way behind demand, rental rates will see a double-digit increase, making condos an attractive purchase,” said Adelson.
What it all means for buyers and sellers
If you are looking to purchase a home in 2018 and cannot put down at least 20%, you need to be prepared to have approximately 18% less buying power. It is a good idea therefore, to get pre-approved for a mortgage before you start home shopping.
Sellers may have to reset their expectations since we will not see the same buying frenzy we did in 2017. Homes are likely to be on the market longer and there will be fewer bidding wars.
Brandon Weiss is still optimistic however about the overall housing market. “In my opinion, the market is still very healthy even if once again, we find many buyers and sellers taking a break to see how these new regulations affect the market. Each time this happens we see a short window of inaction and then a spike. Now may be a very good opportunity in disguise for both buyers and sellers if we are able to work with them to use certain market conditions to our advantage.”