There are a number of factors driving the housing market today. First, house prices dropped over the past two years and mortgage rates have been lower than we’ve ever seen them – making homeownership more affordable to more Canadians. Our economy began to recover late last year, giving consumers more confidence to spend – and we saw that surge in spending in auto and house sales during the first quarter of this year.
Also driving the housing market in recent months is the impending increase in interest rates and the introduction of the HST on July 1 by the provincial government. These two key factors have encouraged people to buy now to beat the HST and to lock in their rates. The extremely attractive financing rates, along with an unleashing of pent-up demand, turned out to be an extremely potent combination in bringing buyers back into the market.
Where does that leave us for 2010 and beyond? According to Kevin Moffat, Vice-President of TD Canada Trust, the supply of listings should increase as a result of the recent solid price gains and the strong sales that make it more attractive to sellers. At the same time, he says, the demand side of the market will see sales remain strong in this ultra-low interest environment, although they are showing signs of cooling. “The moderation in sales is likely partially a reflection of the fact that some of the purchases in 2009 were brought forward from 2010 in order to take advantage of interest rates that were perceived to be too good to last,” he says. “The bottom line is that sales growth is slowing, listings are increasing and this is leading to a cooling in the home price appreciation.”
Two recent developments also contribute to Kevin’s expectation that the market will continue to moderate. First, while he calls the move by the federal Finance Minister to tighten mortgage insurance rules “prudent,” they were expected to boost sales into this month and temper sales thereafter. And, given the considerable press coverage around the change in the qualifying interest rate, there is no question that it has induced some buyers to enter the market before it comes into effect.
A second reason to believe the market will cool is that the Bank of Canada has indicated it will start raising interest rates earlier than anticipated. According to TD Economics, the Bank’s conditional commitment to leave its policy rate at 0.25 per cent until the second half of the year fostered a “now or never” mentality among potential buyers. Despite all the uncertainty of the national marketplace, what has been constant has been Oakville’s almost insular housing market which has bucked the countrywide trend and maintained steady growth and good value over the long term.
Dan Cooper is an award winning Broker with Royal LePage Real Estate Services Ltd., Brokerage – the Number 1 Royal LePage Team for Canada in 2009. He can be reached at 905.338.3737, direct line at 905.849.3303 or through his innovative and interactive website at DanCooper.com. Be sure to catch the Dan Cooper Real Estate Series on DailyWebTV.com. For his free booklet How To Sell Your House For Top Dollar – Fast! or his Guide to Oakville Real Estate, please call the Dan Cooper Team.