Canadian housing prices to rise only 1% next year, TD Bank says

August 31, 2015, Financial Post - Low interest rates will continue to give the housing market a push for the rest of 2015, but by next year consumers can expect price increases below the rate of inflation, says a new report from TD Economics.

“A drop in Canadian borrowing rates through the first half of this year will likely continue to boost housing demand through the summer and early fall months. However, once the impact of past rate reduction wanes by the late stages of 2015, it is hard to point to a catalyst for a further acceleration in housing market activity,” said the report from economist Diana Petramala.

Despite the forecast, TD says 2015 will end up being another record-breaking year for sales and prices which will climb on average by 7 per cent this year.

Part of the reason for the strength of the housing market continues to be affordability and the TD report notes mortgage rates dropped by 55 basis points between January and April on a five-year fixed rate mortgage. says the best deal on a five-year fixed rate mortgage is now 2.49 per cent.

“The low rate environment has helped to keep key markets in Toronto, Vancouver, Hamilton and Victoria humming, with both homes sales and price growth running near a double-digit pace. Markets in commodity-dependent regions, such as Edmonton, Calgary, Regina and Saskatoon have weakened considerably so far this year, but to a lesser degree than was originally anticipated,” wrote Petramala.

TD says that, in the past, mortgage rate cuts of 40 to 60 basis point can boost sales by as much 10 per cent to 15 per cent. While the interest rate reduction will provided a boost to the market for the rest of 2015, it won’t last beyond that.

“We expect sales in this year’s fastest growing markets to fall back in line with their longer-term average next year, and for price growth to taper off,” said Petramala, who forecasts prices to grow on a national basis by 1 per cent in 2016.

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