Hamilton’s real estate market went for quite a ride in 2017. The first few months of the year underwent a level of frenzy Hamilton had never experienced before during what’s typically the slowest selling period of the year.
Then in April when the province communicated its intent to cool down the market with 16 new measures under the Fair Housing Plan, the Seller’s market flipped to a Buyer’s market in a matter of weeks as homeowners listed their properties in droves fearing that home values had reached their peak. The market then flooded with a surplus of listings, leading to an over-supply which then caused prices to drop substantially.
By the end of 2017, however, inventory tightened and the market stabilized as we enter a fairly balanced real estate market going into 2018.
With that said, here are the main themes that will guide Hamilton’s real estate market for this year.
Interest rates are going up, but it’s not a surprise anymore
In contrast to last year’s rate hikes and foreign buyer tax that blindsided most Ontarians to panic sell, the Bank of Canada as well as analysts have already hinted that more interest rate hikes are to be expected this year. We’ve already experienced one interest hike last Wednesday and we can almost certainly expect another jump this year, if not two.
Knowledge of these impending rate hikes is exactly why they will not destabilize the market, either. As Canadians anticipate the new rates, the general population will act rationally and adjust accordingly; it’s the surprise news of these changes that cause market spikes. It is also unlikely that there will be more major changes in real estate legislature from the Ontario government now that the market has cooled off.
The mortgage stress test will bring less buyers to the market
The new mortgage rules that were implemented January 1st will reduce the maximum buying power by over 20%, which is a significant hit to all buyers’ budgets, particularly those in luxury real estate. The stress test will cause all buyers to take a step back and reassess what they can really afford, while also taking many buyers out of the market entirely.
Less competition and more time for buyers to choose
As buyers’ budgets get reduced and the pool of buyers shrinks, bidding wars will become far less prevalent allowing buyers to make better informed and more cautious purchases. The reduced mania will also result in many more offers being conditional on inspections and financing — clauses that many buyers have been leaving out in recent years to get an edge when in competition.
House appreciation will be slight to flat
With higher interest rates, the stress test and limitations on foreign buyers to counter-balance demand, prices at a national level are very likely to stay flat throughout the year. However, real estate differs from city to city and in the GTA, the cities priced higher than Hamilton such as Toronto, Mississauga, Oakville and Burlington will be hit harder than our hometown. Buyers further up the Golden Horseshoe will be priced out of their cities and will continue to eye Hamilton as a viable alternative, bringing demand this way.
Hamilton continues to offer tremendous value when compared to its neighbours and I expect this city to beat the national average and appreciate modestly for 2018.