2018 In Review:
Kitchener-Waterloo Real Estate
Real estate markets are subject to influence on a national or global level (macro pressure) and a smaller, local level (micro pressure). In 2018, we saw macro influence on the Kitchener-Waterloo real estate market in a number of ways. Enhanced national mortgage regulations that require purchasers to qualify based on a benchmark interest rate a full 200 points higher than the central lending rate (effectively adding 2% to the current rates) has perhaps been the strongest downward pressure. This effectively cut away a lot of purchasing power for consumers. Secondly, the Bank of Canada throughout 2018 was sending rather bullish messages regarding the Canadian economy and hinting strongly at interest rates rising progressively over the next two years. The overall effect has seen a stall on rising home values across most of Canada. Nationally residential housing was down almost 5% in December.
2019: Macro and Micro for KW…
The macro narratives for 2019 will largely surround interest rates. The Bank of Canada has begun shifting away from determined language regarding rate increases instead preferring a more deferential tone of “wait and see”. Slumping oil prices are cutting inflation and the global economy is reticent with volatility between the American and Chinese economy. Some of the national banks have even cut interest rates in early 2019, and CIBC’s Deputy Chief Economist recently went on record questioning whether mortgage stress tests are still needed given the dramatic reduction in sales volume nationally and declining values.
Kitchener-Waterloo has not been entirely exempt. Overall, our residential sales volume was down -11.1% in 2018 compared to the torrid year of 2017. The only sector to see a volume increase has been condominiums with a solid +6.4% in 2018 year over year. This of course dovetails neatly into the reduced purchasing power consumers are experiencing. Those sectors of residential real estate that are more affordable are also seeing the fastest price growth. Condos topped out at +12% for the year while townhomes +5.5%, semi-detached +4.7% and detached +4.8%.
As pointed out in previous market reviews, this moderate growth actually places our market as one of the strongest nationally, and only a few other urban areas are outpacing us (mainly Ottawa and Montreal). Economists are pointing out how attractive mid-size cities are becoming for consumers as they offer good urban infrastructure while maintaining comparative affordability to Toronto and Vancouver.
Conditions Are Ideal To Step Up To A Larger Home
Locally, despite a reduction in sales volume, listing inventory remains historically deflated by 50%. It’s hard to see how our market will see declines unless inventory creeps up. There is plenty of Buyer demand to meet the current inventory of homes for sale. It’s still a great time to sell, especially for entry level detached home owners. Those looking to step up to a larger home and unload their first property can be confident as market conditions are ideal and interest rates are still historically low.
Have questions about what your home is worth? Wondering whether now is a good time to Buy? We’re always available to discuss the Waterloo Region real estate market. Simply Contact Us or fill in the form below.