Just as our country's love affair with real estate was heating up once again, the Canadian Mortgage and Housing Corporation (CMHC) has decided to clamp down on guarantees for mortgage-backed securities. While the issue is creating a lot of chatter around the water cooler – and may ultimately serve to push interest rates up by as much as .50 basis points – it's unlikely that home buying activity will dampen. Especially now….
July marked a turning point for housing in many major centres, including Toronto and Vancouver. Overall sales activity in Canada was up over nine per cent from one year ago, with 44,829 homes changing hands in July, compared to 40,962 in 2012. The average price also rose during July, with values up more than eight per cent to $382,373 nationally. While Ottawa has clearly demonstrated its power to "tighten the taps" so to speak, we can't say the same for its ability to assuage consumer sentiment.
Rest assured, affordability will still prevail, with solid fundamentals underpinning economic performance. Growing consumer confidence levels, the threat of higher interest rates down the road, and low inventory levels will support the Canadian real estate market moving forward. As far as mortgage rates go, CIBC Chief Economist Avery Shenfeld hit the nail on the head when he said, "Overall, the days of very cheap mortgages are going to be replaced by cheap mortgages." Essentially, the outlook for Canadian real estate remains steadfast. Although year-to-date sales currently fall short of last year's pace, the gap is expected to narrow in the months ahead. By year-end, unit sales are forecast to be on par or slightly ahead of 2012 levels both nationally and provincially, while the average price of a home will climb by three to four per cent.
C/O Gurinder Sandu
EVP/Regional Director, RE/MAX Ontario-Atlantic Canada Inc.