We, at Team RRP, wish you all the best for a happy healthy and prosperous New Year! As we enter the New Year we share some of our predictions to assist you with your mortgage and real estate plans. Based on our experience and observations here are some things we are watching as we enter 2019:
Economic Volatility will Continue
Due to the political climate we expect volatility in 2019. The US Administration remains in chaos with a partial government shutdown now in effect. Trade disputes continue as Nationalism versus win-win collaboration are the focus. We eagerly await the results of next weeks scheduled Brexit vote to see if the UK Parliament accepts the most recent terms or chooses to enter uncharted territory. The UK is due to leave the EU on March 29th. The bottom line is that geopolitical issues remain the number one cause of market volatility. Businesses and stock markets don’t thrive on uncertainty. We expect 2019’s news cycle to be dominated by more of what we saw last year.
The Canadian Housing Market will Rebound in 2019
2018 saw on average a 31% decline in Vancouver home sales compared to 2017. In large part, this was due to the implementation of the federal government’s stress test. Rising interest rates and record home prices were the other contributors as home buyers decided to wait on the sidelines and see what happened. With fewer sales and price compression we have seen a fairly significant market correction in the higher-end markets of luxury condos and single family homes. With a higher listing inventory, lower prices, and more compression between strata and single family segments, we expect 2019 will be a better year with a rebound in home sales. This being said we expect sales will still be slower than they were from 2015 to 2017, and more in keeping with the 10 year average. The strata market will continue to lead sales numbers.
Interest Rates will Remain Near Current Levels
With economic volatility its hard to forecast what will happen with interest rates. We believe the overall economic environment in Canada, and especially in BC, remains positive. As we ended Q4 2018, we saw a retreat in the pace of inflation and slowing economic growth. We expect BC’s economy to perform admirably in 2019. Migration, local and foreign Investment, and a stable rate of employment should keep BC’s economy ahead of the national average. With interest rates set nationally we expect, at most, two Bank of Canada rate hikes in 2019. Our analysis is that we are reaching the end of the current expansion cycle and so we believe any 2019 interest rate hikes will be limited. A testament to this view is that bond yields have been falling steadily since October. We expect 2019 interest rates to remain near current levels with a very flat yield curve between variable and fixed rates. Lender competition will continue to be a positive factor for consumers looking to renew or take out a new mortgage.
In summary we forecast that 2019 will be a solid year that continues to favour move-up and first time buyers. If you have a mortgage renewal in 2019, we’d love to hear from you as we believe lender competition will remain strong with some lenders offering better rates to new clients. With interest rates higher than the record lows of 2013/2014, those renewing in 2019 need to be prepared for higher payments. Team RRP has a number of tools and systems to assist you.
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