Leftbank condos address. Will the Canadian property market make a “soft landing” or a “hard landing”? The Canadian real estate market has cooled further under the influence of the tax levied on foreigners in the Greater Toronto area. Some analysts expect the Canadian real estate market to make a “soft landing” under the double attack of tax increases and interest rate increases. A more pessimistic analysis suggests that Canada’s huge real estate bubble could burst.Please Visit: Leftbank condos address to Get Your VVIP Registration Today!
Canadian real estate sales fell 6.7 per cent month-on-month on a seasonally adjusted basis, the biggest decline since 2010, according to data released by the Canadian real estate association (Canadian Real Estate Association) on Monday. This is the third consecutive month-on-month decline in Canadian property sales and the second consecutive month of decline of more than 6 per cent. Compared with the same period last year, it also decreased by 11.4%.
Meanwhile, the CREA house price index slowed for the third month in a row. In June, the index rose 15.8 per cent from a year earlier, down from a high of nearly 20 per cent in April.
However, the average selling price of a Canadian home rose only 0.4% year-on-year in June to C $504000 (US $400000). If Toronto and Vancouver are excluded, the average price is only C $400000.
Sales in Canada’s 70 per cent property market fell in June, with the Greater Toronto area (Greater Toronto Area) falling the most as a result of policy changes. In June, real estate sales in Toronto plunged 37.7% from a year earlier. Falling sales led to lower house prices. In June, the average selling price of all types of homes in Toronto was C $793900, nearly 14% lower than at its peak in April.
“changes in Ontario real estate policy at the end of April clearly led to the withdrawal of many buyers in the Golden Horseshoe area and assessed how the real estate market absorbed these changes.” Said Gregory Klump, chief economist of CREA, the Canadian real estate association.
In an effort to curb soaring house prices, Ontario, where Toronto is located, introduced the Fair Housing Program (Fair Housing Plan) on April 20, one of which is a 15 per cent speculative tax on non-residents, the so-called foreign purchase tax.
This policy is effective in cooling the local property market. At present, the Toronto property market has changed from the seller’s market a few months ago to the buyer’s market.
Diana Petramala, an economist at Toronto-Dominion Bank, points out that the ratio of Toronto real estate sales to newly listed homes has fallen from more than 60 per cent to less than 40 per cent. “according to this standard, Toronto has now completely shifted from the seller to the buyer.” She said in a report to clients. This ratio between 40 and 60% indicates that the real estate market is in balance.
The Toronto real estate market seems to be following in Vancouver’s footsteps. Capital inflows into the Vancouver real estate market also plummeted after the introduction of a foreign purchase tax last summer. Real estate sales in the greater Vancouver area fell 4 per cent in June from the previous month, down 29 per cent from the peak in February 2016.
In addition, the move by the Bank of Canada to raise interest rates is also expected to reduce property transactions. The Bank of Canada announced last Wednesday that it would raise its benchmark interest rate, the overnight lending rate for financial institutions, by 25 basis points to 0.75% from the current 0.5%, the first increase in nearly seven years.
Some economists believe concerns about the overheating of the Canadian real estate market, particularly in Toronto and Vancouver, prompted the Bank of Canada to raise interest rates as economic data improved.
In 2010, Canada announced a mortgage eligibility rate (mortgage qualifying rate) for people with a high proportion of loans. This rule will ensure that buyers who borrow at current interest rates will be able to afford the mortgage if the minimum interest rate (prime rate) rises in the future. For example, assuming a five-year interest rate of 2.25%, a buyer must be able to prove that he can afford a mortgage even if the interest rate rises to 5.44%.
In view of the “cooling” of the property market in recent months, some analysts predict a “soft landing” in the Canadian real estate market.
“the Canadian real estate market is now in its third month in the expected soft landing. Weakness is caused by provincial and federal policy changes, but it will eventually stabilize with the help of rising interest rates. Mortgage rates are in line with the Bank of Canada’s rate hike last week and are likely to rise with three other increases expected by the end of next year. ” Peramana said. She expects Canadian real estate prices to rise 6.5 per cent this year and fall by 2 per cent next year.
Royal Bank of Canada has previously said that the earlier optimism in the Canadian real estate market has disappeared and that market sentiment is now more defensive. The bank believes that activity in the Canadian real estate market will weaken compared with 2016.
More pessimistic analysis than a “soft landing” expected that the Canadian real estate market faces significant risks and there may be a “hard landing”. The International Monetary Fund (IMF) warned in May that the Canadian property market could pose a “significant” risk to its economy.
Torsten Slok, Deutsche Bank’s chief economist, pointed out in 2015 that Canada was in huge trouble for several reasons. The most important thing is to rely too much on the frothy real estate market. Second, the average Canadian family failed to reduce its debt in time after the financial crisis, as the United States did. At the same time, the labour market has become particularly dependent on the assumption that the housing market will last.
This series of problems suggest that if the Canadian real estate market suddenly deteriorates or slows, one of the country’s major sources of employment in recent years will shrink, leaving the Canadian economy in trouble.
Now, two years later, the above-mentioned problems raised by Rock have not been solved, but have become more and more serious.
First of all, the debt of Canadian households continues to rise, and the proportion of debt to personal disposable income even exceeds that of the United States during the financial crisis.