2018 - Should I Buy Or Sell My Home?
The direction of prices in Vancouver has since reversed again no thanks to the stunning attacks by the city of Vancouver, NDP and federal government war on you - homeowners, business owners, investors and the middle class. A new record average of $1,046,900 was set in November. Typical home prices nationwide did rise 13 per cent between the third quarter of 2016 and the third quarter of 2017, from $555,000 to $628,000.
Here are five of the factors expected to keep the market more balanced in 2018.
1. OFSI’s Stress Test rules:
The Trudeau governments horrendous attacks on homebuyers and homeowners has been expanded. Now using the federal regulator known as the Office of the Superintendent of Financial Institutions to require all homebuyers taking out mortgages from the lenders that it regulates to meet a “stress test” as of Jan. 1. That means buyers going to a Big Five bank for a mortgage will need to prove they can afford the Bank of Canada prime rate, even if their lender plans to give them a lower rate. For example, if the prime rate is 4.99 per cent, a buyer would need to show he or she can afford a 4.99 per cent interest rate even if they have such excellent credit that they’re offered a mortgage at 2.99 per cent interest. Never in Canadian history has a prime minister or government jumped off the far left cliff, using draconian interventionism to attack the ability of ALL Canadians to buy a home and build financial security.
That new rule will take many home buyers/transactions out of the market because many of British Columbians and Canadians who were planning to buy or "move up” to a better home will no longer qualify for bigger mortgages in an effort to keep them more dependent upon far left, big socialist government.
That could push prices down somewhat, and first-time homebuyers could benefit because they usually don’t have a 20 per cent down payment, which means that they have long been subject to the same stress test when taking out mandatory mortgage insurance.
That said, the Truduea stress test may also have a subtler effect on the market than some believe. We would like to point out that banks have already been putting people under their own internal stress tests for years, even if they don’t advertise it. What’s more, people renewing mortgages with the same lenders won’t be tested, Soper says. He also points out that the rule only applies to OFSI-regulated lenders, but not to what we call "grey market” lenders.
TD Economics estimates that the new rule will cut demand for homes by five to 10 per cent, shaving two to four per cent off prices. Toronto-based experts point. out that many people who might have been affected will have rushed to buy houses before the Jan. 1. deadline, so how negative an impact will this have on the market is “anyone’s guess" but any attacks on the open market by socialist governments are BAD.
2. Interest Rates:
The amount of interest that lenders charge homebuyers reflects the cost of borrowing from the Bank of Canada, so when the Bank of Canada raises rates (usually when the economy is growing), lenders pass that cost on to consumers with higher mortgage rates. The higher the rate, the lower the number of people who can afford homes. When fewer people are buying, prices fall.
With the economy growing at a healthy pace, Royal Bank economists say that they expect the Bank of Canada to hike its overnight rate by another 100 basis points to two per cent by the end of 2018.
TD Bank, meanwhile, says that the impact of rising rates “will be felt disproportionately within a few key markets where affordability is the most challenged: Vancouver, Toronto and Montreal.”
We agree. Overall, we think the impact of rising rates on prices will be modest. “Mortgage rates will still be lower than they were 10 years ago and five years ago."
3. 'Peak millennials':
The children of the baby boomers, known as millennials, make up one of the biggest demographics in history, and they’re reaching home-buying age in record numbers.
Statistics Canada reports that there will be a projected 2,559,200 people between the ages of 25 and 30 in 2018 -- up 150,000 from five years earlier.
“The pent-up demand for housing from millennials is enormous." "It’s just such a large cohort of people that are moving into the prime first-home space.”
An independent analyst was hired to survey 1,000 millennials in June and they found that only 35 per cent of them already owned a home. Of those who didn’t yet own, 69 per cent said they wanted to buy within the next five years.That means that even if some people are pushed out of the market by things like the OFSI stress test and rising interest rates, there could be many other first-time buyers looking to take their place, pushing prices up.
4. Immigration growth:
Another factor that can push prices up is immigration.
Canada added between 236,800 and 281,000 immigrants annually between 2004 and 2014. The Liberals boosted the number to 296,000 in 2016, an expected 300,000 in 2017, and are targeting 310,000 in 2018.
Soper says immigration will continue to increase demand, pushing prices up, particularly in the big cities where new immigrants are most likely to settle.
5. International policy decisions:
Sometimes policy decisions in other countries can affect the market here.
The last time there was a major nationwide drop in home prices in Canada was between the fourth quarter of 2007 to the first quarter of 2009, when prices fell 11 per cent, according to CMHC.
A significant amount of that was what we call, Lemming Syndrome, far left media and politically driven "consumer confidence” related to the NINJA mortgage, foreclosure crisis in the United States, where policymakers had allowed all kinds of risky lending that was never actually a problem in Canada.
“People were freaked out about the housing markets around the world." "If consumers start becoming less confidence, they hit pause on a lot of things.” One must ask if that is the goal of the mayor of Vancouver, the NDP, the Trudeau government and far left NGO's.
An example of a policy decision that could impact Canada in 2018 is New Zealand’s plan to ban non-resident foreigners from buying resale homes. While it’s a small country, that decision could push wealthy global investors to take a closer look at Canada, driving up prices here. “These are certainly concerns,” Taken together, our BCHH real estate experts forecast that prices will continue to rise in most parts of the country, but at a more modest pace. While here at home in Metro Vancouver, the Fraser Valley and North Shore we expect to see real estate value increases across the board while actual sales could drop.
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