The real estate market is affected by many factors—predominantly economic—which is why it seems sometimes like you might get a whiplash checking on house prices and sales going up and down like a yo-yo!
The strength of the overall economy has one of the biggest impacts on the real estate market. High GDP (a country’s productivity indicator), low unemployment, low interest prices, and income growth encourage house buying, and homeowners’ ability to shell out for high prices. Reverse conditions, of course, have the opposite effect.
But other factors, such as government policy and intervention into the market, the level of speculative demand, demographic shifts, and supply and demand trends also affect housing prices and sales. Real estate is a highly sensitive resource sector.
Going into 2018, even with a robust economy, experts say that the market overall may slow down initially (during the first quarter at least), but likely pick up towards the second half of the year.
Re/Max’s Housing Market Outlook Report expects the average home price in Mississauga to decrease 2.5 per cent to $711,322. Keep in mind though, that that decrease comes after a huge spike in prices during the red-hot market of 2017, which skyrocketed prices in Mississauga.
At the root of the initial decline in prices in 2018 is the nervously awaited mortgage stress test. It kicked in on Jan 1. Issued by the Office of the Superintendent of Financial Institutions, the stress test requires existing and prospective homeowners to meet stricter criteria when applying for a mortgage or new financing.
Shawn Zigelstein, a sales rep for Royal LePage Your Community Realty, says the stress test could cause affordability to drop 20 per cent, as potential buyers and sellers take a wait-and-see approach.
“Moreover, some potential move-up buyers will likely delay listing their homes as they will not be able to access sufficient financing for their desired next purchase. With further diminished affordability, it is likely that demand for entry-level properties will surge.” That means that condos may become more expensive as buyers become priced out of the single-family housing market.
However, sales volumes for the full year are expected to remain on par with 2017, and it looks like the first quarter of the year will be good for buyers with financing in place.
“Relative to recent years, 2018 is expected to be a good year for buyers and this is a continuation from what we are currently seeing in the market today,” said Zigelstein. “While the condo market should continue to see price growth from high demand, buyers looking at detached properties in the first quarter will be able to ask for conditions, have a much greater selection and should be competing against fewer multiple offers.”