Lower mortgage rates, help for first-time buyers and increased immigration levels are all pushing the housing market upwards.
The most optimistic forecast (or the most pessimistic, if you’re hoping for lower prices) comes from Capital Economics, which in a report last Friday said “momentum is building” in house price growth. If things stay at their current trend, house price growth will be running at an annual rate of 6 per cent by March of next year.
“The rise in the sales-to-new listing ratio suggests that house price inflation will surge,” senior Canada economist Stephen Brown wrote.
The sales-to-new-listing ratio measures how many houses are selling against how many houses are coming on to the market. The higher the ratio, the tighter the market, so the larger the price growth you can expect.
Though it varies from market to market, in general a ratio above 60 per cent suggests price hikes ahead.
The best rates available for a five-year fixed-rate mortgage at the major banks fell to around 2.7 per cent today from 3.5 per cent at the start of this year, Brown said, citing data from RateSpy.com. The lower rates mean Canadian buyers can afford about 10 per cent more on the purchase price of a home than they could a year ago.
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