Canada’s housing market seems on course for a soft landing given the lack of deterioration in mortgage debt arrears so far. Nevertheless, there is a perceptible downturn in house price appreciation led by Toronto and Vancouver, though this downturn has combined with falling mortgage rates to help resales recover in the past few months. That house prices have not fallen further is due to very tight resale markets in the Ontario metro areas for single-family homes and in the Vancouver area for condo apartments.
Two new developments have led to a slight downgrading of the short-term house price forecast. First, new single-family home inventory is starting to pile up, particularly in the Prairie metro areas, which will exert some downward pull on the resale market. Second, the forecast for household incomes has been re-estimated in line with new Canadian Income Survey data for 2017, and this has led to slightly slower household income growth with resulting downward pull on house prices. The first cause may be good news, though, as a looser new-home market will help overall affordability in the short term. But beyond the next two years or so, tighter mortgage lending will pull down on demand and will continue to drag on appreciation.
Nevertheless, tighter mortgage lending is starting to have an effect, as slowing house price growth has stabilized the previous upward trend in homeownership costs and should soon start to pull down on average mortgage debt-to-income ratios, preventing any serious deterioration in mortgage debt service.
The RPS – Moody’s Analytics House Price Forecasts are based on fully specified regional econometric models that account for both housing supply-demand dynamics and long-term influences on house prices such as unemployment and changes in mortgage rates. Updated monthly and providing a 10-year forward-time horizon, the forecasts are available for the nation overall, its ten provinces and for 33 metropolitan areas, and cover three property style categories, comprising single-family detached, condominium apartments and aggregate, in a number of scenarios: a baseline house price scenario, reflecting the most likely outcome, and six alternative scenarios.
RPS Real Property Solutions is a leading Canadian provider of outsourced real estate solutions including property valuations, business intelligence and mortgage-related services. We partner with financial institutions, mortgage professionals, real estate professionals, government agencies and economic research firms to help them make informed decisions with confidence.
Our expertise in providing solutions for property valuations, data-driven risk management tools, market trending and insights, consulting services has established RPS as the strategic partner for real solutions to real property challenges.
Moody’s Analytics helps capital markets and risk management professionals worldwide respond to an evolving marketplace with confidence. The company offers unique tools and best practices for measuring and managing risk through expertise and experience in credit analysis, economic research and financial risk management. By providing leading-edge software, advisory services, and research, including the proprietary analysis of Moody’s Investors Service, Moody’s Analytics integrates and customizes its offerings to address specific business challenges. Moody’s Analytics is a subsidiary of Moody’s Corporation (NYSE: MCO), which reported revenue of $3.6 billion in 2016, employs approximately 11,500 people worldwide and maintains a presence in 41 countries. Further information is available at www.moodysanalytics.com.
Yvonne von Jena
Head of Innovation & Marketing