The Canadian Real Estate Association Predicts a Slowdown in 2017

Canada’s hottest real estate housing markets may just reach the end of the ropes.

The Canadian Real Estate Association based in Ottawa reported that home sales dropped by 2.8% in May compared to the total sales made in April, which represents almost 115,000 realtors in the country that 2017 wouldn’t be a good year for the real estate market after all.

Robert Hogue, senior economist with the Royal Bank of Canada said: “The long-awaited cooling of Canada’s housing market may be finally at hand,”. “Only time will tell. When you look at market conditions in Canada’s two hot markets, it is still very, very tight.” He added.

The federal government has been urged to do something about the issue at hand. Bank executives have also expressed concerns regarding the untimely price increase in the housing markets of Vancouver and Toronto.

Finance Minister Bill Morneau, promised in a statement to take a “deep dive’” into the housing market date, with the sole aim of getting down to the bottom of the problem concerning the two markets.

The Canadian Real Estate Association predicts that the remaining quarters of this year would be strong. The housing market has made a huge improvement from last year. However, the market is still expected to fall out in 2017, unless something is done quickly.

CREA says this year will see a 6.1% increase in sales, with over 536,400 home expected to be sold. But if construction companies try to keep up with the population growth, 2017 would still a peak for housing sales that’s the highest the country has ever witnessed. Next year, sales are expected to only increase by 0.2%, the group says.

“National sales activity and average prices reached new heights in the first half of 2016 amid a growing supply shortage of single-family homes in British Columbia and Ontario, particularly in B.C.’s Lower Mainland as well as in and around the Greater Toronto Area,” CREA said in a release.

The association said that places such as Saskatchewan and Alberta would bounce back in 2017 as these cities are likely to benefit from their oil production.

British Columbia is also expected to witness a decrease in sales and prices next year. But Ontario wouldn’t be as unfortunate as they are expected to see a modest price growth of 1.5% next year.

National prices are expected to be affected by the moderation in British Columbia and Ontario if prices drop, the same way it did when prices skyrocketed. The Canadian Real Estate Association said “In these two provinces, luxury sales activity is anticipated to recede from current levels, resulting in a decline in their share of total sales activity,”

Gregory Klump, chief economist with CREA said “This suggests a lack of supply may be starting to rein in sales amid a continuation of strong housing demand,” as he tried to point out that the market in both cities is affected due to the inventory drop.

Klump also said that B.C and Ontario would soon witness a shortage of housing for homes going in at over $3 million.

“The proportion of sales above that is just not predicted to rocket ever higher,” Klump said.