Don't count on big increases in Hamilton house prices next year, CMHC forecasts

The average price of a home sold in Hamilton and Burlington in 2018 won’t be “much higher” than the 2017 average price.

Hamilton market has 'regressed strongly' since April

New mortgage rules come as Hamilton home prices have been dropping since the spring. (Kelly Bennett/CBC)

The years of skyrocketing year-over-year housing prices in Hamilton appear to be over. 

Canada's national housing agency is predicting average prices in 2018 won't be "much higher " than this year's average price.

But this year's average price will still be "significantly higher" than 2016, in part because prices rose so extremely in the first quarter of 2017 before the provincial government instituted new rules aimed at cooling hot Toronto and Hamilton markets.

The average price for 2016 was $497,055. 

The Canada Mortgage and Housing Corporation forecasts that Hamilton will end 2017 with an overall average price of between $555,000 and $575,000.

But for next year, it expects the average price to be somewhere between $535,000 and $585,000.

CMHC expects the average sale price of homes in Hamilton, Burlington and Grimsby in 2018 to be somewhere between $535,000 and $585,000. (CMHC)

Since April, home sales and prices in the GTA and surrounding markets like Hamilton "have regressed strongly," the CMHC said Wednesday.

Still, the CMHC flagged the Hamilton market as "highly vulnerable" in its look back at the Hamilton market in the second quarter of this year, April to June.

Prices rose quickly in the second quarter and were much higher than what local economic fundamentals and jobs could support.

Four times a year, the national housing agency judges 15 housing markets in the country on four criteria, rating them with green for little evidence of the problem, yellow for moderate evidence and red for strong evidence.

For the fifth quarter in a row, Hamilton received a red rating as CMHC's overall assessment.

The CMHC singled out five cities with overall red flags, and also the national housing market as a whole. (CMHC)

But only one underlying category was rated red: Overvaluation, defined as where prices are higher than incomes, mortgage rates and other fundamentals can justify.

There was little evidence of overbuilding. And there was yellow, or moderate, evidence of overheating and price acceleration in the second quarter, CMHC said.

Here are the factors economists are looking at that could affect which end of the price range the market lands on:

  • Prices will be toward the higher end of that range if demand is greater than expected for housing, due to more jobs than expected or mortgage rates staying steady.
  • Prices will be toward the bottom end of that range if prices drop in Toronto resulting in fewer buyers coming in to Hamilton.

But new mortgage rules set to come into effect Jan. 1 could play a role, too. No matter how much of a down payment borrowers have, they will have to submit to a "stress test" to see how well they would weather an interest rate increase.

In addition to lowering the amount buyers can finance, the move is expected to dampen demand by allowing fewer people to qualify for loans. But that in turn could bring prices lower as sellers find fewer buyers able to pay premium prices.



Kelly Bennett is a freelance reporter based in Hamilton. Her writing has appeared in CBC News, the Globe and Mail, the Toronto Star, Voice of San Diego and in the National Observer for the Local Journalism Initiative. You can follow her on Twitter @kellyrbennett or email kelly@kellyrbennett.com.

With files from CBC Business