It’s been quite the year for the Canadian real estate market, with industry observers worrying about a housing bubble one day, and excess regulation the next.
But according to one poll, Canadians are getting optimistic about real estate heading into the new year.
The Bloomberg and Nanos Research Canadian Confidence Index has found that optimism in the national real estate market has surged in the last month.
The index — a weekly pool of Canadian consumer confidence — saw a jump of 59.46 from 58.83 this week, after a month of strong numbers well above the 2017 average of 58.41.
“Over the past four weeks positive views on the future value of real estate have increased,” Nanos Research Group Chairman Nik Nanos said in a statement.
The news doesn’t come as a surprise to Toronto-based real estate broker Roy Bhandari.
“When you look at the preconstruction condo market, in particular, it’s been a strong year,” Bhandari, who operates the site TalkCondo, tells BuzzBuzzNews. “Even after the introduction of Ontario’s Fair Housing Plan in April, there was still solid investment in that space.”
While the Canada Mortgage and Housing Corporation’s Fall 2017 Housing Market Outlook Report found that low-rise starts will decline in 2018 from 75,900 to between 66,200 to 68,400, condo starts are expected to surge to between 124,400 and 136,200 units.
Bhandari says that, when it comes to investment in the real estate market, Canadians are likely thinking long term, and that the fundamentals of markets like Toronto and Vancouver are strong.
“When you look at markets like Toronto, there’s still a shortage of supply relative to the demand,” Bhandari says. “So I think you’ll continue to see confidence in that market from Canadians heading into the new year.”
What about the impact of new mortgage rules? As of January 1, a stress test will require all uninsured mortgage borrowers to qualify against the Bank of Canada’s five-year benchmark rate, or at their contract mortgage rate plus an additional 2 per cent.
The revisions are intended to ensure that uninsured borrowers can withstand higher interest rates. The overnight rate — which influences mortgage and sat at a historically low 0.5 per cent earlier this year — has been raised 50 basis points by the Bank of Canada since July, with a third hike predicted in 2018.
Bhandari says that, in a market as in demand as Toronto, the new rules won’t slow sales. Instead, buyers will look at the more affordable options in the market.
Already, condo prices have spiked in the GTA. According to the Toronto Real Estate Board’s Q3 market figures, the average price of a Toronto condo sits at $510,206, up 22.7 per cent from $415,894 a year earlier.
“I think you’re going to be seeing a lot of condo sales in the new year,” says Bhandari. “As people are priced out of low rise, they’ll still be looking to buy. So confidence in the condo market should be very high heading into 2018.”