Canada’s mortgage and real estate markets appear to be stabilizing with interest rates remaining low, and markets settling after the introduction of the harmonized sales tax (HST) in Ontario and British Columbia – two provinces that were the driving engine for price growth in 2009.
Interest rates are at near record lows and likely to remain that way. Any rise in our central bank’s key interest rate that may be forthcoming when the Bank of Canada governors convene on September 8th to review its lending rate are likely to be, at most, only 0.25%. And, given continuing uncertainty in global economic growth, Canada’s central bank will likely be tempted to leave interest rates where they are in the near term.
Meanwhile, the Financial Post reports that the current slowdown “had been expected” by the Canadian Real Estate Association (CREA), as homebuyers in B.C. and Ontario rushed to close purchases before the implementation of the HST in those provinces on July 1st. (It is important to note, however, that the HST applies to services, such as real estate commissions, used in purchasing and selling existing homes, and not to the actual sales price of the home. Most services from mortgage brokers services are also exempt from the HST.)
According to the CREA, July’s 6.8% drop in home sales from June of this year was “was almost entirely the result of fewer sales in British Columbia and Ontario.” Together these two markets “accounted for 85% of the change in national [home sales] activity. Together with a drop in new home construction, cooling markets in these provinces can be “expected to keep prices stable.”
CREA president, Georges Pahud, notes that in light of generally positive economic projections. Both provincially and nationally, “Activity may remain at lower levels for some time, but ultimately we expect a more stable market to emerge, with demand coming back into line with economic fundamentals.” said Mr. Pahud. “While the outlook for economic and job growth remains generally positive nationally and in all provinces, the pace of the recovery will vary by region.”
