With another stellar year (25% increase in home values) for the Hamilton real estate market behind us, many are asking what 2018 has in store for the market. Here’s my predictions for the Hamilton real estate market in 2018.
I anticipate home values to continue to grow, but at more stable rates as we adjust to new mortgage rules and higher interest rates. Leading economists, banks and Government agencies all support this theory.
On a local level, we believe Hamilton’s home values will continue to rise at levels higher than those seen on the national level. Real estate is local, street by street, block by block and city by city, and each market is its own little ecosystem. I believe that Hamilton is still in the very early stages of it’s recovery and expect growth to be above the norm for quite some time. I expect to see a number of older buildings being restored downtown, numerous restaurant openings and many new businesses opening and/or relocating to the city this year. Our new condo market should continue to mature with the arrival of numerous new projects. Work on the Pier 8 Promenade park is expected to commence this spring, final pre-construction planning for the LRT will wrap-up, construction of the Centennial GO Station will move along and the city will select a group to develop our new Pier 8/9 community.
On a national level, all of the fundamentals behind our market point to further home value appreciation. Our economy is strong, interest rates are historically low, unemployment is low, wages are increasing, housing supply is decreasing, immigration levels are at all time highs and over 1 million new temporary workers are expected to arrive in Canada this year.
We expect the Bank of Canada to raise interest rates approximately three times as long as the economy continues to grow at a healthy pace. OFFSI’s new mortgage rules came into effect January 1, forcing buyers to qualify for rates significantly higher than the posted rates they are offered by lendors. This will effectively cut the average buyer’s budget by approximately 20 percent.
Buyers should adjust to the new rules fairly quickly. It may take a few months for us to really gauge the outcome of the new rule change as many buyers still have active mortgage pre-approvals in place based on the old rules. I do not anticipate home values declining as a result of this. I do expect more downward pressure on properties in the lower price ranges. We should see significantly more activity, competition and price appreciation on condos, townhouses and affordable detached homes as a result. The luxury market will most likely soften as higher interest rates and decreased borrowing abilities lesson demand for higher priced properties. We could see some relief in this segment if the same factors force would-be luxury buyers in more expensive markets like Burlington or Oakville to seek affordable options in Hamilton. A 20 percent cut in budget means everyone will be taking a step down as far as what they’re purchasing in 2018.
In Hamilton, these mortgage rules will be helpful as GTA buyers will be priced out of the market and will flock toward Hamilton, which only leads to our home prices increasing. We will see a continued in-flow of people coming into the market to seek affordability and to enjoy all the things a real city has to offer. We don’t see any change in that happening next year; in fact, the new mortgage rules and rate increases are only going to force more buyers to seek housing in our marketplace. Rents should continue to increase and vacancies should continue to decrease. As a result, we should see continued growth in the new development markets. With that comes new business, new people living downtown, and overall very positive news for the city.
We can all go into the new year knowing that home values are stable and will only continue to grow. The new stress test should not have an adverse impact on home values. And really, for buyers going into the market, 2018 is going to be a great year. Most of the growth this city will see is expected in the next decade. We believe that now has never been a better time to get into the market.
