If you’ve been holding off on buying your Markham area home due to the high house prices, 2018 might be your year: experts predict that home prices will decrease next year in the GTA. While it’s not going to be a huge drop, and there are many uncertain factors at play, there is indeed a glimmer of hope for those previously turned away – or who stayed away – when it was time to consider a house purchase.
Change in interest rate
One of the biggest factors at play, which is going to contribute to a decrease in home prices, is the change in interest rates. Implemented by the Bank of Canada in August, 2017, the increase in interest rate, which partially dictates mortgage rates, saw a decline in house sales, whereby individuals were being more cautious of locking in their mortgage at the new rates. This is typical behavior in times such as these, whereby many people move to the sidelines when it comes to applying for a mortgage loan, realizing that the new rates make it more difficult to obtain the house they are after. In fact, experts predict that these trends will continue into 2018, thanks to this interest rate change, and that prices will drop by a further 0.6 percent. Once they do, consumers will be ready to hit the market and get their new home at the more affordable price.
Another big factor at play for 2018 in the Markham and GTA real estate market, is the change in mortgage laws. Effective January 1, 2018, under these new laws, individuals seeking to get a mortgage loan will be subject to a stress test. This test will require the applicant to qualify for a mortgage at a higher interest rate than the current rate, as proof that he/she could pay back a loan should the rates increase during the period of their contract. This means that individuals will likely be selecting to purchase houses within a lower price range than previously, increasing demand for these lower priced options and hence increasing supply. Experts expect that the changes will cause as much as a six percent decline in prices in 2018.
Drop in sales
In connection with the new mortgage laws, experts also predict that initially, there will be an increased incidence of individuals who are not able to afford a house, due to the higher down payment requirements, and hence lead to a drop in sales, especially in higher priced housing options. If homeowners are keen to sell, these market changes will force individuals to lower their prices to compete with smaller more affordable housing and to be able to meet the new demand created by the implementation of stricter lending and borrowing laws.
While there may be lots of impending changes slated for the 2018 housing market, the future doesn’t look too bleak. Keep your savings account strong because if you have been holding out on your house purchase, this just might be your year. Visit us at Martin MacFarlane and we’ll help you get a house right where you want to be!