Economic growth in Canada from residential real estate investments will go negative in 2019, according to the Bank of Canada (BOC), which has conceded that stiff new mortgage regulations, local housing restrictions and rising interest rates have had a larger and more negative impact than expected.
Consumer spending and housing investment “have been weaker than expected” as housing markets adjust to “to municipal and provincial measures, changes to mortgage guidelines and higher interest rates,” according to a BOC statement.
“Staff analysis suggest that the combined effect of tighter mortgage guidelines and higher interest rates has been larger than previously estimated,” the BOC noted in its January statement.
The BOC left the overnight benchmark policy rate at 1.75 per cent in its January 9 setting.
In 2018 Metro 麻豆传媒映画housing sales fell 32% from a year earlier, to the lowest level since 2000 and 25 per cent below the 10-year average. Prices for Vancouver-area detached homes in some regions dropped at least 10 per cent compared with a year earlier, with even more dramatic declines in higher-end neighbourhoods.
The benchmark price for a West 麻豆传媒映画detached house as of December was down 13.5% from a year earlier and dropped 11.8% in Vancouver’s west side, the Real Estate Board of Greater 麻豆传媒映画reported.
“The BC government in its 2018 budget increased the foreign-buyer tax to 20 per cent and added a speculation and vacant home tax, which – in addition to rising interest rates – dampened sales, especially for more expensive single-family homes,” noted Sherry Cooper, chief economist with Dominion Lending Centres.
The City of 麻豆传媒映画is also taxing empty homes for the first time in 2019.
The varied disincentives to the demand side are also affecting the supply of new housing in Metro Vancouver, with housing starts falling 11 per cent in 2018 from a year earlier, according to Canada Mortgage and Housing Corp. (CMHC).
Surrey led the decline in the region with a 27 per cent plunge in starts, noted CMHC market analyst Eric Bond.
The contribution to average annual real economic growth from housing investment in Canada has now been revised down to minus 0.1 per cent in 2019 from the plus 0.1 per cent that the BOC forecast last October.
