Canadian real estate agents can focus on selling as low borrowing costs continue to fuel demand for homes. The troubles of mortgage lender Home Capital and efforts to cool Toronto’s hot housing market are having little effect, but provincial governments are acting and agents must keep their fingers on the pulse of their markets.

For now, agents can focus their business activities on what they do best: Selling.

However, don’t lose sight of moves made by provincial governments.

One issue for agents in Ontario is the provincial government’s introduction of a 15 percent tax on property purchases by foreign buyers in Toronto in April. This effort is one of 16 measures to cool the property market as prices in Toronto and Vancouver has risen by double digits, driving fears of a housing bubble.  Cheap credit and speculation are seen as key factors, calling the hand of leaders there and creating issues that agents in these markets must keep tabs on.  The move in Ontario matches a move made by leaders in British Colombia last year to cool the Vancouver market.

After BC acted, home prices started to skyrocket in Toronto as an alternative destination.  As of March, Toronto was seeing annual price appreciation of about 28 percent.

Analysts say that the measures taken by the Ontario provincial government may cool the market in the short-term, but any change will be temporary.

“Low interest rates are going to be oxygen … that keeps the fire going in the Toronto and BC housing markets – and that fire has spread to southern Ontario as well,” Sal Guatieri, senior economist at BMO Capital Markets, told Reuters.

The issues are nothing new to real estate agents or Canadian politicians. In fact, Ottawa has moved several times in recent years to tighten mortgage lending rules including expanded stress tests on mortgages.

Low interest rates also are keeping home prices in Canada higher.  While the Bank of Canada has kept interest rates at 0.50 percent for the last two years, these measures haven’t had much impact.  Prices have doubled over the past decade and are forecast to climb 9 percent in 2017.

The frothy real estate market has caught the attention of one financial institution.


The International Monetary Fund recently sounded an alarm that should catch the attention of agents because it could unsettle the market. The IMF noted that imbalances in Canada’s housing market have increased to a degree that could pose a “significant” risk to the outlook for the broader economy.

Another factor in the Canadian market is the weaker Canadian dollar, which has dropped against its U.S. counterpart as a drop in oil prices offset data showing strength in the domestic economy.

Canada’s gross domestic product grew at an annualized 3.7 percent pace, slightly below economists’ expectations for 3.9 percent, although growth in both the third and fourth quarters of 2016 was revised upward.

The economy also appeared to have solid momentum heading into the second quarter, with growth rising by a better-than-expected 0.5 percent in March.

“If we continue to get growth numbers like this … it’s going to be tougher for the Bank of Canada to avoid rate hikes at some point in the distance,” said Derek Holt, head of capital markets economics at Scotiabank.

Reuters also reported that home price inflation is forecast to cool to 3 percent in 2018, down from previous forecasts of 3.5 percent.  Analysts questioned by Reuters about the potential of a sharp correction said it was somewhat or very likely in Toronto and Vancouver but unlikely nationally.

And for real estate agents, a forecast increase in housing starts can mean that their focus can remain on selling this spring and summer.

Claim Your FREE Real Estate Treasure Map!