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The Canadian Real Estate Association said in its real estate market forecast that the shortage of housing will become a “reality” in 2020. The latest national statistics released by the Canadian Real Estate Association on January 15th confirm this trend. The number of existing homes available for purchase in December was the lowest in 12 years, the association said. Sean Cathcart, a senior economist at the Canadian Real Estate Association, says the problem has been around for a long time.
Millennials in their 20s and 30s are eager to buy a house, but baby boomers are in no hurry to move to a smaller one. Young apartment owners are also trying to find larger apartments or townhouses. At the same time, those who own property are increasingly using renovations-such as improving basements and building third floors-to increase living space rather than looking for a bigger home. Cascart says these long-term trends have been putting pressure on housing supply for years.
He added that now that buyer demand is rebounding from its 2018 low, the market is tightening again. “the combination of all these factors will move the situation this year in the same direction as it did at the beginning of the year.” Nationwide, house price growth put on the brakes in 2017 and stagnated in 2018 and the first half of 2019 as a series of policy measures cooled the market. In British Columbia and Ontario, provincial governments impose surcharges on foreign home buyers. In Ottawa, the federal government conducted stress tests on both insured and later uninsured mortgages.
At the same time, the Bank of Canada gradually raised its benchmark interest rate, pushing up borrowing costs. But in the second half of 2019, demand from buyers and house prices began to pick up again. “it now seems that most buyers in most markets have adapted to these measures,” said Robert Hogg, a senior economist at Royal Bank of Canada. ” In part, this may be because people have enough time to prepare for the higher down payment required by stricter lending rules in Ottawa, or because some buyers decide to buy cheaper homes instead. In addition, mortgage rates have been falling for some time in 2019 as long-term borrowing costs in the bond market have fallen. This, in turn, lowers the benchmark interest rate used to calculate mortgage load tests, allowing some aspiring homebuyers to return to the game. Hogg says high immigration rates have also increased the number of home buyers in places such as Halifax and Prince Edward Island. Tight markets could hit some sellers, he added. They are worried that they will have no house to live in if they sell the house without buying a house, and many sellers want to line up to buy a new house before putting up the “for Sale” sign.
“but if everyone does this, it means there aren’t so many houses available for sale,” Hogg said. He added that it was common for property market transactions to rebound after a downturn. To make matters worse, relatively few new apartment buildings have been inaugurated in most parts of Canada in the past few months. Mr Hogg says that while new housing is still on the rise, the completion of large multi-unit projects is prone to delays. Thomas Davidoff, a professor of real estate finance at the Suntech School of Business at the University of British Columbia, said that although condos are usually sold before construction, many of them are likely to be resold or rented once they are completed. Fortunately, the shortage of apartments will not last long. Davidoff pointed out that many apartment buildings under construction in the Greater Vancouver area are expected to be completed in the next two years.
“there is a shortage of inventory in the Vancouver apartment market-I don’t believe it will be the same by the end of this year.” Hogg made similar assessments for Vancouver and Toronto. On the other hand, there are still many vacant houses waiting for buyers in the prairie, Newfoundland and Labrador. Cascart of the Canadian Real Estate Association says that while employment levels have recovered from the 2015 oil price shock, many households are not earning as much as they used to be. Sellers are reluctant to cut prices sharply, so the market has been slowly adjusting, he added. Although things seem to be stabilizing and the warm season will give some new impetus to the market, selling homes in these areas is still “difficult”, he said.