What are the Forces Affecting the Real Estate Market?

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There are several opinions on which direction the real estate market will go in 2017. Whether you are planning to buy or sell in the near future it is important to look at 5 forces that will affect the Canadian real estate industry in 2017.  

1.U.S. Federal Reserve’s Interest Rates
Although technically Canadian and American central banks set their interest rates autonomously from each other, changes in the U.S. rates generally has a huge impact on Canadian mortgages rates. U.S. Federal Reserve Chair Janet Yellen raised rates by a quarter of a percentage point at the end of 2016, and has implied three more rate hikes will occur in 2017. Although it is doubtfully Yellen will take action so quickly, Canadians should expect mortgage rates to increase throughout the year.

2.Canadian Economy
By and large the Canadian economy will not nose-dive if interest rates increase and the demand for homes decrease. But rising interest rates accompanied with an already weakening economy could reduce the aggregate number of buyers nationwide and place a strain on the economy. The Centre for Economics and Business Research expect the Canadian economy will fall from 10th place to 12th place.  

3.Foreign Buyers
Economists have refuted the impact of foreign buyers on the Canadian real estate industry. Nevertheless, a sudden decrease in investors overseas will have a slowing effect on domestic housing prices. The volume of Chinese investors has impacted on the economy since not only the rich, but also millions of middle-class buyers, have flooded our markets looking for places to secure their money as the Chinese currency falls.

4.Construction
Despite the fact that land is a constrained resource in that you cannot produce more of it, this has not been a huge issue because the supply of real estate is no longer only consistent of suburban households but also high-rise condos. Furthermore, there has been no shortage of condo developments in Canada’s biggest cities, nor has there been and shortage of buyers waiting to invest. Analysts will be keeping a close eye on the current equilibrium between supply and demand and what shifts may occur during the year to effect price.

5.Government Regulations
The last variable in the housing market will be how the government reacts to any changes in prices. Regardless of their free market stance, parliament has been willing to intervene when prices increase so rapidly. A new tax on foreign buyers in Vancouver is just one example of such interventions. The problem with this is sudden changes in rules may not only alter housing prices but also the wider economy. 

Taken from an articles by CBC News, written by John Pittis
http://www.cbc.ca/news/business/canada-real-estate-homes-2017-1.3913968

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