The dire forecast for consumers and investors alike came in the wake of updated numbers released by the Canadian Real Estate Association on Monday (January 16), which showed that actual (non-seasonally adjusted) home sales activity nationwide declined by 5.0 per cent year-over-year in December 2016, despite a 2.2 per cent recovery from November.
While BMO is still waiting on the final figures for the whole of 2016, Kavcic noted that housing will not be able to contribute to the same level this year. Initial BMO estimates pegged the 2016 output of the real estate industry at roughly 12 per cent of GDP.
“One of the big contributors has been Vancouver, and just through the last four or five months the market there has already started to correct,” Kavcic told The Canadian Press.
The CREA report also noted a 3.5 per cent annual increase in the national sales price, along with a 14.3 per cent year-over-year increase in the MLS home price index. New listings have declined in over half of all Canadian markets, with Calgary, B.C.’s Lower Mainland, and the GTA experiencing the greatest drops.
“[Tightened] mortgage regulations are expected to contribute to lower sales activity this year, though the extent to which they will weigh on housing markets across Canada will vary,” CREA president Cliff Iverson wrote in the report.
“New regulations mean that in order to qualify for a mortgage, home buyers will either have to save longer for a bigger down payment or purchase a lower priced home. In urban centres where the latter are in short supply, that’s likely to translate into fewer sales,” CREA chief economist Gregory Klump explained.
Canada’s real estate sector will not be able to boost the national economy in 2017 as much as it did in previous years, BMO economist Robert Kavcic predicted earlier this week.