Canadians need to prepare for “several years of retrenchment” with 1.3 per cent annual price growth per year at most over the next 5 years, Moody’s said.
“Exact turning points are difficult to predict, but the combination of restricted mortgage lending, taxes on foreign purchases in the largest metro areas, and the expectation of higher mortgage rates means that house prices are likely to experience a slowdown in the next few years,” according to report author Andres Carbacho-Burgos, as quoted by the Financial Post.
“Affordability as measured by the median dwelling price to median family income ratio is also close to a record low, so it is hard to see house prices maintaining the same momentum as before,” the study added.
Moody’s also cautioned that further measures to curb speculation in Toronto and Vancouver will exacerbate the slowdown. Current trends in these markets will continue to hold, however.
“Greater Toronto is likely to maintain moderate house price growth, while the more policy-restricted market in Vancouver will lead to prices holding steady in coming years,” the report stated.
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The growth of residential property prices nationwide will weaken significantly in the next half decade as cooling policies in the hottest markets will make themselves felt, according to the latest study by Moody’s Analytics.