Canquest Mortgage Inc.

Has the Last Domino Fallen Yet?

It is no mystery that the declining price of oil and gas has had a  dramatic effect on the economy, especially Alberta’s economy. The correlation between the energy sector and mortgage interest rates has been especially evident throughout 2016. Crude oil just dropped under the $40 mark at the beginning of August, natural gas has dropped to $1.66 mmBTUs this year, and interest rates are at an all time low. In addition, the economic downturn has also had a negative effect on house prices, specifically in Alberta.


Oil prices are expected to stabilize over the next year which would suggest that interest rates will stay consistent if not rise at a moderate level. As well, it is projected that the national market conditions will improve from year to year moving forward but this is mainly from the sales of single-detached homes that will lead the growth in overall house prices.

This positive outlook may be a little misleading to an optimist living in Alberta or Saskatchewan due to the fact that the sales will be mainly driven by British Columbia and Ontario. That said, Alberta’s home prices are actually expected to fall below the national level for the next little while. Since Alberta’s housing market is highly dependent on energy prices, one can only hope that energy prices start to recover in the next year or else recovery will be delayed for yet another.

So what does this mean for you? If  you own a home currently, it's just a matter of time before the slight dip you've experienced in your equity is gained back. If you're thinking of buying your first home, or contemplating moving up; the mid-level market segment in Alberta has remained relatively stable and will continue to do so. Those people looking for a "basement bargain" buy on a starter or mid level house are highly unlikely to find the savings they imagine. If you're looking in the luxury end of the market, there definitely is an oversupply of high end homes.  Either way, this an amazing time to look at investing in real estate.

Source: (Canadian Housing Report 2017-CMHC).

As of August 2, The Province of British Columbia imposed a 15% tax credit to all foreign home buyers. British Columbia’s Finance Ministry came out with a report last month that, province wide from June 10 to July 14 this year, revealed that 1 billion dollars flowed into the province’s real estate market from foreign investors. More specifically, 885 million out of the 1 billion, was invested just in the Metro Vancouver area.

This tax will not affect the luxury housing market in Vancouver but it is predicted that it will affect middle-class families. Vancouver property is already some of the most expensive in the country and now foreigners living in Vancouver, that had a dream of owning one day, will have an even harder time making that a possibility. However, because the tax will deter some foreign investment, this might mean a slight decrease in home prices.

The main objectives of the tax are:

Meeting demand for building -the local’s needs

Rental Programs- the Housing Priority Initiatives Fund

Repairing the effects of the self-regulated real estate industry

The Province of British Columbia announced this Spring that the property transfer tax would come into effect in the near future. However, the speed at which it came into effect was a surprise and many buyers found themselves trying to close on their purchase before the tax would come into effect. Unfortunately, many transactions did not make the quick deadline and collapsed due to many home buyers cancelling and or breaching their contracts. Experts say it will take at least 3 months to see how effective the tax really is but the hope is that it will make home ownership slightly more affordable and accessible for the middle-class in Vancouver.

How will this affect other markets in and around Canada?

There are many predictions on where foreign buyers will target their investments. Many sources claim that foreign investors will target the next real estate leading cities in Canada such as Ottawa, Montreal, or Toronto. There is also speculation that the Okanagan or Seattle would become the next rational choice due to their close geographic proximity from Vancouver. I guess we will have to just wait and see!

Province of British Columbia: Housing Data Update July 26, 2016 (.PDF)
Province of British Columbia: Press Release 2016

Quantus had a great time with our team and lenders during the 2016 QMS work conference in Kelowna, BC. We enjoyed zip-lining and wine touring our way through the Okanagan!