Canada’s red-hot housing market looks set to cool next year, with property prices heading for a ‘soft landing’, according to the Royal Bank of Canada (RBC).
According to the bank’s latest forecast, the number of homes changing hands across the country is expected to fall by around 9% in 2018 compared to the frenzy of 2016, and with fewer transactions taking place home prices are forecast to only increase marginally.
RBC estimates that the average price of a home in Canada will rise by 1.2% in 2018, compared to an expected gain of 7.8% in 2017, and down from the 9.6% increase on average in 2016, as new housing regulation, including tax hikes on foreign homebuyers in Vancouver and Toronto, have an impact on the market.
What’s more, the Bank of Canada expected to raise its trendsetting interest rate from its existing level of 0.5% to 1% by the end of 2017. By the end of next year, rates will likely be at 1.5%, the report indicates.
If the bank’s forecast is accurate, 2018 will be the first year that home prices in Canada have risen by less than 2% since 2009, when property values fell, albeit marginally, amid economic turmoil caused by the global financial crisis.