The outlook for the residential property market in Canada has been lowered as new mortgage rules are expected to cool the housing sector and interest rates are expected to rise.

Nationally, sales activity is projected to decline by 7.1% in 2018, according to the forecast from the Canadian Real Estate Association (CREA) which says that the decline reflects weaker sales in B.C. and Ontario. Its report says that amid heightened housing market uncertainty caused by provincial policy measures, high home prices, ongoing supply shortages and tightening mortgage stress tests as interest rates rise.

Similarly, the national average price is projected to ease to $498,100 this year, down 2.3% from 2017. CREA says that the decline in the national average price reflects fewer transactions in B.C. and Ontario; by the same token, price declines in these provinces reflect fewer sales of higher priced homes in Vancouver and Toronto.

In 2019, national sales are forecast to rebound modestly to 496,500 units but remain below levels recorded in 2015, 2016 and 2017. The rebound reflects an expected partial recovery of sales over the second half of 2018 in Ontario and B.C. followed by a gradual softening in activity over 2019 as previously deferred activity wanes and interest rates continue to rise.