NO HOUSING CORRECTION IN 2016

Canada’s economic conditions are gradually improving as the country climbs out of a technical recession. Statistics Canada recently stated the nation’s GDP grew 2.3% in Q3.

Modest increases in employment and earnings, coupled with low interest rates, should also support real estate demand in 2016.

“We should expect real estate markets across much of the country to remain stable in 2016, benefitting from low interest rates and firmer economic growth,” says Sal Guatieri, senior economist at BMO Capital Markets. “Markets in the oil-producing regions should begin to stabilize, as we expect oil prices to recover partially.”

And even though last year Guatieri expected interest rates to rise in late 2015, he didn’t anticipate the drop in oil prices, which led to the BoC cutting rates twice this year. Guatieri forecasts rates will hold steady in 2016, “though longer-term bond yields will drift modestly higher in response to tighter monetary policy in the U.S.”

CMHC, however, is predicting interest rates will “rise gradually from current levels starting late in 2016.” This will cause mortgage rates to likewise increase. The corporation expects the one-year mortgage rate to be 3% to 3.8% in 2016, while the five-year rate should be between 4.7% and 6%.

When interest rates do rise, Guatieri warns the Vancouver and Toronto real estate markets could be at risk of correction, though it won’t happen in 2016. “As crazy as it sounds, prices are likely to continue rising in these two regions.”

The average price of a detached home in Toronto was $669,400 in October, up 11.7% annually from 2014, according to MLS. In Vancouver, the price was $1.2 million, a 20% annual increase.

These prices compare to other major cities: Montreal at $316,500 and Calgary at $496,800. The national average price of a home was $454,976 in October, up 8.3% year-over-year.

Rising property costs are concerning, since Canadian homeowners already feel housing is unaffordable. A Manulife Bank of Canada survey found less than half (46%) of residents in Toronto, Montreal, Calgary, Vancouver and Edmonton describe their property markets as affordable, compared to 68% nationally.

Still, buyer demand in Vancouver and Toronto will remain steady in 2016, notes Guatieri, due to millennials and an influx of foreign investors.

“Montreal will continue to strengthen as Quebec’s economy is poised to pick up in response to stronger exports,” he adds. “Calgary’s battered market should stabilize as oil prices are expected to increase moderately (averaging $52/barrel for WTI) in 2016.”

Meanwhile, strong rental demand from immigrants and millennials has boosted condo construction in Canada to its highest in two decades, notes Adrienne Warren, senior economist and manager at Scotiabank.Powdered generic brand viagra urad dal is also a constituent of delicious snacks like ‘murukku’. This could be a major reason why a person finds a quality amount of erection through get viagra from india . With such a high best buy on viagra 4frontimports.com percentage, it is important to know what is causing this problem since there could be other underlying problems such as heart disease also associated with men impotence and which the natural cures for impotence or even natural sexual desire enhancers you may use. Many men have switched to 4frontimports.com purchase viagra because viagra did not work well enough for them.

On an annual basis, overall housing starts are expected to range from 153,000 units to 203,000 units in 2016, and 149,000 units to 199,000 units in 2017, according to CMHC.

“Even with this new supply, the national average rental vacancy rate has edged only modestly higher over the past year, and remains low at 3.3% for purpose-built apartments and just 2.3% for condominiums,” says Warren in a report.

A LOOK AT THE U.S.

Most regions in the U.S. still offer good real estate value, says Guatieri, as affordability remains better than normal.

The median price of a resale home in Q3 2015 was $227,400, according to the National Association of Realtors. The cost of a new home during that time was $294,100.

Lawrence Yun, chief economist of the National Association of Realtors, agrees the U.S. market will see another strong year of housing demand. “Sales will be driven by increasing consumer confidence and solid job growth – especially in the states in the West and South that are leading the rest of the pack and will continue to see further job creation,” he says in a report.

He adds the southern and western states have the most competitive real estate markets. “Affordability concerns remain heightened as low inventory continues to drive up prices.”

And affordability would become even more difficult as interest rates rise. Yun had forecasted the Fed would raise rates as early as this month (and he was right — yesterday, the Fed raised rates to 0.50%), and then again in March 2016. He predicts mortgage rates will likewise go up to 4.5% by the end of next year.

Guatieri adds other factors could drive up prices, including “pent-up demand from the millennial generation, which delayed its home buying plans because of elevated student debts and the psychological scars from the housing bust.”

Further, stronger economic growth in the U.S, “led by American consumers, suggest the U.S. housing market will outperform Canada’s market in 2016.”