The Canadian real estate market went through a rough stage in 2016 as housing prices reached record levels and with this year also expected to be sizzling hot, it is difficult to determine the future of Canada’s rental market. To bring to light the extent at which the housing market is growing, figures from the fourth quarter indicates the Canadian Real Estate Association Price Index rose from 184 to 208.9 with the overall number of sales increasing by 6.3%. Home buyers were definitely aware of the implication of this figure through the high home prices. But similarly to the beginning of every market year, experts are going all out to urge for measures to control the real estate market to return to normalcy. Additionally, predictions have also become a normal part of the real estate market with various projections being made every year.
From what we are expecting to see this year, it goes beyond doubt that the provincial and federal governments will be introducing more regulations to address the current housing situation. Toronto in particular will definitely see new mortgage rules but generally, there is no expectation of a market crash. However, compared to last year, there is an expected 3.3% decline in sales activity but this not take away the fact that home prices will remain high. An even if home prices are to decline, people should not expect to be a see a drop in rental prices but prices will remain stable and modest. Tightened mortgage rules is someone that is clearly expected in Toronto but tougher mortgage regulations in the real estate market will most likely be reflect in the rental cost.
Despite the hot real estate market in Ontario the demand to live in the city continues to rise with the current vacancy rate at 1.5%. The increase in job opportunities serves as an attractive for many to desire to live in the city. This has led to serious bidding wars for the available rental units in the growing population. Aside from other home types, condo home types have become a major hit amongst renters with the average condo rent rising by 12% by the end of 2016 with a 34% increase in condo sales of almost 30,000 new condos. The increase in interest on condo properties is because they are more affordable than other home types. This year is also going to see an increase in construction of new homes across the country as the demand for low-rise homes on the increase. But while many might think a higher level of supply will cut down on rental costs, but far from this the value of new units will be added as the worth of existing units fade away.
Interest rates in Canada is also expected to hike thanks to the influence of the U.S.as interest rates continues to increase in the U.S it implies higher costs for property owners in Canada. the demand for rental units in Canada is also expected to increase if the U.S maintains its immigration policies. This will have significant implications for renters. Finally, there is a high chance for those looking forward to a bubble burst to see prices return back to normal. To some extent, home prices are expected to slow down as there is little projection of a third consecutive record-breaking year.