One big bank’s bleak outlook for the housing market

by Justin da Rosa21 Oct 2016
TD Bank is predicting the recent mortgage rule changes will create a soft landing for Canadian housing.

“Overall, the mix of housing policy changes recently announced by the federal government is targeted at safeguarding the health of Canada’s overall financial system,” TD Bank said in its most recent economic report, New Mortgage Rules to Reinforce Soft Landing in Canadian Housing. “While each individual rule is incremental in nature, when taken together they will likely serve to cool the housing market alongside other dynamics that are also in place.”

TD claims in the report, written by economists Beata Caranci, Michael Dolega, and Diana Petramala, that home sales will fall slightly in 2017.

It also forecasts a pronounced decline in Toronto’s average home sale price, which has recently experienced  a 18% year-over-year spike.

The same is expected for Vancouver.

“The new foreign tax rule in Vancouver has already virtually wiped out foreign investment in that city, and the additional mortgage regulations are likely to limit the market from re-heating,” the bank said. “There is no doubt that the new rules will create some near-term volatility, but we believe these rules will anchor sales activity to its long-run average.”

Along with softening in the markets, TD is wary of uncertainty in the market. It argues the government should revisit the recent rules if a sharp correction materializes.

“However, how the multitude of colliding dynamics ultimately play does pose downside risks to our outlook,” TD said. “In many respects, the ongoing layering of regulatory rules and oversight is a trial-and-error exercise to find the right balance between demand dynamics and mortgage oversight.”

Industry news

Submit a press release


Do you do commercial deals?