Many new housing-market forecasts are predicting a surge in house prices next year, thanks to lower mortgage rates and increased demand from first-time buyers and new immigrants.
According to James Laird, co-founder of Ratehub.ca, low mortgage rates will create demand and limited resale and lack of new housing will shift things to a seller’s market. Typically, the rise in the sales-to-new listing ratio suggests that house price inflation will surge.
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% suggests price hikes ahead. Between August and October 2019, the ratio was 63.7% for the country as a whole and 60% in BC, just above the 54% long-run average.
Further, the best rates available for a five-year fixed-rate mortgage at the major banks fell to around 2.7% in early December from 3.5% at the start of this year. The lower rates mean buyers can afford about 10% more on the purchase price of a home than they could a year ago.
Our predictions for the Canadian housing market in 2020 are as follows:
- The Bank of Canada will cut its Prime rate midway through the year (good news for my variable mortgage clients).
- 5-year fixed-rate mortgages will stay below 3%.
- The first-time homebuyer incentive will fail to gain traction.
- 9 out of 10 Canadian’s will continue to shop for mortgages.
- The B-20 mortgage stress test will be re-visited.
In Vancouver, we expect to see price growth returning to the housing market after a year and a half of declines. We expect the pricey west side of Vancouver to return to being a “buyer’s market” by next Spring, while the east side of the city will experience a balanced market.
If you are one of the 90% of Canadian who will shop for a mortgage in 2020 or if you have been on the fence for the past year and a half and are worried about price growth, feel free to contact us to and we’d be happy to crunch the numbers for you to see what mortgage you can fit into your budget in 2020.
