The party is over ? Maybe … maybe not.
Fears of higher mortgage rates are driving strong sales in a housing market that was on the ropes just a year ago. August sales numbers hint at a Canadian market that has “shades of taking flight again,” said Bank of Montreal economist Sal Guatieri.
The idea that low mortgage rates are gone forever sent Canadian home shoppers into a panic this summer. Thousands rushed to use their rock-bottom pre-approved mortgage rates and buy a home, contributing to a 20 to 50 per cent spike in sales last month
Canadian home prices to drop 15% on back of mortgage rate rise: Sun Life
Canadian home prices will drop 10% to 15% “over time” as mortgage rates rise and supply swells, said Sadiq Adatia, chief investment officer of Sun Life Global Investments Inc.
Low interest rates are helping to boost property markets across the globe and Canada is no exception, says a new report from the Bank of Nova Scotia.
However, future gains in Canada are no guarantee, the report from economist Adrienne Warren says.
“I don’t think the demand is going to be there for housing,” Adatia, who manages about $6.4-billion at Sun Life Global, a unit of Sun Life Financial Inc.
The recent upswing in housing activity is being driven by buyers rushing in as banks raise borrowing costs, Adatia said Thursday at the Bloomberg Canadian fixed-income conference in New York.
“I do think it’s a dead cat bounce,” he said.
Home sales surged in Canada’s two largest markets in August. Sales rose 21% to 7,569 units in Toronto from a year ago, according to the Toronto Real Estate Board, and Vancouver existing home sales surged 53%, said that city’s real estate board.
The average price of a home sold in Toronto was $503,094 in August, the Toronto realtors group said.
Home prices rose 2.3% in August from the year-ago period, according to the Teranet-National Bank Composite House Price Index released today. Toronto prices advanced 3.8% from a year ago, while Vancouver housing prices fell 0.1% in the month from last year.
The country’s housing market will likely experience a so-called “soft landing,” as the near-record household debt-to- income ratio continues to constrain construction, said Julien Reynaud, desk officer for Canada at the International Monetary Fund.