Low Interest Rated Boost Housing Market : BMO

The Canadian Housing Market seems to be planted fairly firmly in balanced territory, and BMO Economics feels that this is in large part to a continuation of a low interest rate environment.


“Low mortgage rates are offsetting weaker consumer confidence and cooling job growth,” said Robert Kavcic, Economist, and BMO Capital Markets. “Relatively stable sales and price trends are likely in the year ahead.”Regina’s housing market is heating up and leading the way in activity, while the red-hot Vancouver market is beginning to fall back towards earth. Notably too, Vancouver is not experiencing the crash that many had expected after a surge of foreign investors early in the year, but rather is experiencing a moderation in prices and in activity.Higher end sales have slowed down in Vancouver, which have been partly responsible for the surge in area prices; prices are beginning to stabilize somewhat, and are beginning to reflect a buyer’s market again. “After peaking above $800,000 in June, seasonally-adjusted prices in Canada’s most expensive city have drifted down to $758,000 – partly due to fewer high-end sales – and B.C. is looking like more of a buyers’ market,” stated Mr. Kavcic.

Growth activity has been largely based in Western Canada, particularly in Regina and Calgary. Reflecting October figures, Kavcic said, “Regina is now the sales growth leader, up 24.8 per cent year-over-year, while Calgary’s market continues to firm up, with sales running 15.2 per cent above year-ago levels.”

Toronto continues to hum along, with prices and activity continuing to climb. In a market where supply is becoming a challenge, bidding wars are becoming more frequent, and are effectively continuing to raise prices. The condo market in particular, is contributing heavily to the spike in prices, which in and of itself is unusual. As a housing type, condos do not usually hold such an impact on overall price appreciation.

“Condo sales and prices have outperformed detached properties somewhat in the past year, up 19 per cent year-over-year and 9 per cent year-over-year, respectively,” said Mr. Kavcic. “Overall, Ontario remains a relatively tight market, with the sales-to-new listings ratio sitting above historical norms at 57.4 per cent.”

Karen Blomquist, Mortgage Broker with Mortgage Intelligence, told Propertywire.ca that, while the currently low interest rate environment has its’ benefits in terms of helping to support the housing market, and offsetting other economic deficits, consumers still must be mindful of the pitfalls of taking on too much debt for their own financial health:

“In my needs analysis with a client I ensure that we make a plan based on the current environment, their capacity to earn more money in the future, and what interest rates may do.  Whether the couple is planning for a family, going back to school or a life change I like to ensure that I add some futures into my clients planning process to ensure they are not in a financial problem in the future.  I have a bit of advice for my clients I ask them to put their entire budget on paper and then literally budget with cash for three months with envelopes full of cash.  This gives a much more realistic view when planning whether or not they can afford their current lifestyle as well as the proposed future.”