With prices continuing to push higher in British Columbia and Ontario and sales hitting records, average home values are set to rise 8% in 2016 to $478,100, it is predicted.
In 2017, it is expected to rise by another 1.1% to $482,500 in 2017, the Canadian Real Estate Association (CREA) has predicted in an updated forecast.
Sales in Canada are set to rise by 1% to 511,400 units in 2016 and by a further 0.4% in 2017, to 513,400, CREA believes. In its last quarterly forecast in December 2015, it estimated that 2016 sales would fall 1.1% to 498,600.
This year’s updated projected increase is lower than the 5.4% rise to 506,410 sales achieved in 2015.
CREA’s recent forecasts anticipated that housing activity would rebalance in 2016, with cooling activity and smaller price gains in British Columbia and Ontario, resulting in slower national price growth.
But many of the defining themes among Canadian housing markets in 2015 have persisted, and in some cases intensified, in early 2016.
Interest rates are now also widely expected to remain low for longer, with lending rates not expected to increase until the second half of 2017, says CREA.
“Canadian resale housing market trends this year are expected to resemble those apparent in 2015, with very tight supply leading to strong price gains in British Columbia and Ontario – particularly in the Lower Mainland and in and around the Greater Toronto Area.
“Price gains in these regions are expected to continue to stand in sharp contrast to moderate price declines among housing markets whose prospects are closely tied to oil and other natural resource prices. In line with the prevailing forecast for stronger Canadian economic growth beginning in the second half of 2016, Canadian home sales activity is now expected to rebalance in 2017.”A).
British Columbia is again forecast to post the largest annual increase in activity (11.8%), with Alberta expected the record the largest annual sales decline (18.7%). A lack of supply is expected to hold activity in check in Ontario in 2016 (0.3%) despite the continuation of very strong demand.
Elsewhere, modest sales gains in Manitoba and Quebec (3.4%), Prince Edward Island (3.3%) New Brunswick (1.2%), Nova Scotia (1.1%) are forecast for 2016, reflecting expected improvements in these province’s economic prospects.
By contrast, sales activity in 2016 is forecast to fall in two of Canada’s major oil-producing provinces, Newfoundland and Labrador by 4.5% and Saskatchewan by 3.7%.
British Columbia is forecast to be the only province where average home prices rise materially faster (10%) than the national average, reflecting an increasing proportion of sales above $1million. The rise in Ontario’s average price (8.2%) is forecast to be roughly in line with the national increase.
Elsewhere, average prices in 2016 are forecast to rise by 2.1% in Manitoba, 1.6% in Quebec, and 1.1% in both Nova Scotia and Prince Edward Island.
Average prices are forecast to fall 2.5% in Alberta, 2.4% in Saskatchewan, 0.4% in New Brunswick and 1.4% in Newfoundland and Labrador.
In 2017, national sales are forecast to reach 513,400, as activity in B.C. and Ontario comes off the boil due to deteriorating affordability while confidence begins to recover in provinces hardest hit by weak prices for oil and other natural resources.
Consumer confidence is anticipated to strengthen and begin drawing homebuyers off the sidelines in Alberta, Saskatchewan and Newfoundland and Labrador as their economic prospects improve. This is anticipated to contribute to a modest rebound in sales activity in these provinces in 2017.
British Columbia is the only province forecast to post an annual decline in home sales in 2017, reflecting a combination of a growing shortage of single family homes available for sale and deteriorating affordability. Even so, activity is expected to continue trending near record levels. Ontario is forecast to see sales level off in 2017.
Sales activity is forecast to continue to push higher in Manitoba, Quebec, and Nova Scotia in 2017, reflecting the prevailing forecast for improving economic prospects in these provinces. Sales in Prince Edward Island are also forecast to improve as the province continues to benefit from a lower Canadian dollar.
Slower national average price growth in 2017 reflects weaker price gains in British Columbia and Ontario. Price trends in these provinces reflect an anticipated slowdown in luxury sales activity, a continuing supply shortage of relatively more affordable low rise family homes and an anticipated increase in relatively more affordable condo unit sales as a proportion of total sales activity. In other provinces, an ample supply of listings relative to demand will continue to keep price gains in check.
The Canadian Real Estate Association represents more than 100,000 real estate brokers, agents and salespeople working through more than 100 real estate boards and associations.
*At the same time, February 2016 data suggests the national average sale price rose 16.4% year-on-year in February, but excluding British Columbia and Ontario, it declined 1.4%.
National home sales rose 0.8% in the last month to record a second consecutive month-over-month increase in February 2016.
Actual (not seasonally adjusted) activity was up 18.7% compared to February 2015 and the number of newly listed homes edged up by 0.5% from January to February.
The national average sale price rose 16.4% on a year-over-year basis in February; excluding British Columbia and Ontario, it declined by 1.4%.
The number of homes trading hands via Canadian MLS Systems rose 0.8% in February 2016 compared to January. The monthly increase lifted national sales activity to the highest level since June 2007.
A greater number of local housing markets posted a monthly decline in sales activity than posted a monthly increase; however, the latter accounted for a larger share of national transactions. The Greater Toronto Area (GTA), Okanagan Region and Fraser Valley made the largest contribution to the monthly increase in national sales activity, offsetting monthly sales declines in Edmonton, Greater Moncton and Montreal.
CREA President Pauline Aunger, says, “Two of Canada’s hottest housing markets look set to stay that way heading into the spring home buying season. Meanwhile, other major urban markets elsewhere in Canada are well balanced or have ample supply. All real estate is local, and Realtors remain your best source for information about sales and listings where you live or might like to in the future.”
Actual (not seasonally adjusted) sales activity rose 18.7% on a year-over-year basis in February 2016, standing 12.7% above the 10-year average for the month. Activity increased above year-ago levels in February in about three-quarters of all local markets. BC’s Lower Mainland, the GTA and Montreal contributed most to the year-over-year increase in national activity.
Gregory Klump, CREA’s Chief Economist, says, “The number of single family home sales above one million dollars is rising in Greater Vancouver and the GTA.
“Tightened mortgage regulations apply to homes selling above five hundred thousand dollars and below a million dollars. The tighter regulations combined with a short supply of single family homes will restrain transactions below one million dollars. If recent trends continue, home sales above one million dollars will account for a greater share of activity and will further fuel year-over-year average price increases in these markets. Meanwhile, price growth will remain more modest in other housing markets that don’t have an on-going or developing supply shortage like the kind we’re seeing in the Lower Mainland of British Columbia or around the GTA.”
The number of newly listed homes edged up 0.5% in February 2016 compared to January. The rise in new listings in the Lower Mainland of British Columbia, York and Mississauga Regions of the GTA and Hamilton-Burlington helped to push the national figure higher. Monthly increases in new listings in these housing markets were offset by monthly declines in Central Toronto, Calgary and Montreal.
The national sales-to-new listings ratio rose to 59.5% in February 2016 versus 59.3% the previous month – the highest rate since November 2009. A sales-to-new listings ratio between 40-60% is generally consistent with balanced housing market conditions, with readings below and above this range indicating buyers’ and sellers’ markets respectively.
A little over one third of all local housing markets recorded a ratio above 60%; as in recent months, virtually all these housing markets are located in British Columbia and Ontario.
The Aggregate Composite MLS HPI rose by 8.49% on a year-over-year basis in February 2016 – the largest gain since June 2010. Year-over-year price growth accelerated among all property types tracked by the index.
Two-storey single family homes again posted the biggest year-over-year price gain (10.54%), followed by townhouse/row units (7.41%), one-storey single family homes (7.38%), and apartment units (6.34%).
Year-over-year price growth continued to vary widely among housing markets tracked by the index.
Greater Vancouver (22.18%) and the Fraser Valley (19.39%) posted the largest gains, followed by Greater Toronto (11.30%). Meanwhile, year-over-year price growth in Victoria accelerated to almost 10% in February while Vancouver Island home price growth picked up slightly to 5.7%.
By contrast, home prices fell around 3.5% on a year-on-year in Calgary and by about 3% in Saskatoon. Year-over-year price growth climbed out of negative territory in Regina for the first time in close to three years in February. Additionally, home prices edged higher on a year-over-year basis in Ottawa (0.82%) and rose modestly in Greater Montreal (1.67%). Price growth also strengthened further in Greater Moncton (6.97%).
The national average price continues to be pulled upward by sales activity in Greater Vancouver and Greater Toronto, which are Canada’s most active and expensive housing markets. If these two housing markets are excluded from calculations, the average is a more modest $355,235 and the year-over-year gain is reduced to 8.7%.
Even then, the gain reflects a tug of war between strong average price gains in housing markets around the GTA and the Lower Mainland of British Columbia versus flat or declining average prices elsewhere in Canada. If British Columbia and Ontario are excluded from calculations, the average price slips even lower to $291,510, representing a decline of 1.4% year-over-year.
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