P.E.I.'s hot real estate market expected to cool in 2018
Canadian Real Estate Association predicts home sales on P.E.I. to drop 7% this year
Real estate sales on P.E.I. will drop seven per cent in 2018, according to a new prediction by the Canadian Real Estate Association (CREA), while prices will dip one per cent.
Strong demand coupled with low supply drove up housing prices on P.E.I. in 2017, even after a record-setting year in 2016.
"It's really a story about what happened in 2017 — we had some extraordinarily strong activity in the first half of 2017 —we expect there'll be some headwinds to prevent that from occurring in 2018," said Gregory Klump, chief economist with CREA.
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Klump expects the new mortgage stress test that came into effect Jan. 1 will make it more difficult for people to qualify for financing. He also predicts higher interest rates.
P.E.I.'s Real Estate Association agrees the market will cool.
'Little bit of a slowdown'
"We're just going to see a little bit of a slowdown — it's not 'the sky is falling,'" said association president Mary Jane Webster.
"Especially in Charlottetown, our inventory levels are a little lower than we would like to see, so because of that it's just going to naturally slow down," Webster said.
The positive effect is an increase in new housing construction, Webster noted.
Seven per cent fewer sales translates into 150 fewer sales expected in 2018.
Because the Island has small numbers of home sales, the effects of the changes will be magnified by statistics.
"All it takes is a few sales this way or that to make big percentage changes," Klump pointed out. "When you've got lower levels of activity, smaller variations in sales have a bigger statistical impact."
There was an increase in home sales in December over November 2017, Klump said, likely because of the tighter mortgage regulations that came into effect Jan. 1.
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With files from Laura Chapin