After a two year slump, the future’s looking bright again for Canadian real estate. Economists expect positive growth in the national housing market in 2020, supported by low mortgage rates, a solid job market, and a rising population.
In fact, in a recent report, RBC Economics called 2019 a “turning point for Canada’s housing market.”To understand why—and where the market is headed—we take a closer look at some of the key indicators and summarize expert predictions for the coming year.
More importantly, we explain what impact these changes will have on buyers, sellers, and homeowners in 2020 and beyond.
SALES VOLUME WILL RISE
After peaking in 2016, Canadian home sales volume fell in 2017 and 2018. Fortunately, we saw a turnaround last year as sales began to recover, and economists expect the trend to continue. In a recent “Housing Market Outlook” report, the Canada Mortgage and Housing Corporation (CMHC) predicts “home sales will increase in 2020 and 2021, offsetting the declines observed since 2016 by the end of the forecast horizon.”
The Canadian Real Estate Association expects to see a modest rate of growth this year. “Sales are forecast to continue to improve through 2020, albeit slowly. National home sales are forecast to rise by 7.5% to 518,100 units next year, with most of this increase reflecting a weak start to 2019 rather than a significant change in sales trends out to the end of next year.”
What triggered this rebound in market activity? According to Rishi Sondhi of TD Economics,“The beneficial combination of solid job markets, rising household incomes, healthy population growth, further distance from restrictive government policies and low mortgage rates have given a boost to demand.”
RBC Economics believes the main impediment to growth will be a lack of supply to meet the reinvigorated demand. “In fact, low inventories in many local markets appear to be holding buyers back who are faced with fewer and fewer options,” noted RBC in its November housing report.
What does it mean for you? The market is heating up as buyer demand grows. If you’re planning to purchase a home this year, be prepared to compete for the best listings. And if you’re a seller who has been waiting for the market to pick up, now may be a good time to act.
HOME PRICES WILL INCREASE
Home prices declined in many markets as sales volume fell. This year, however, sales are set to outpace the supply of new listings. That’s causing prices to increase as buyers compete for fewer available homes. “The rise in the sales-to-new listing ratio suggests that house price inflation will surge,” writes Stephen Brown of Capital Economics.
Nationally, the CMHC expects the average sales price to exceed its peak 2017 level by the end of 2021, led by growth in Ontario, Quebec, and British Columbia. “Other regions will generally see modest gains over the forecast horizon,” predicts the agency in its Fall 2019 Housing Market Outlook.
Rishi Sondhi of TD Economics predicts that affordability challenges will temper price growth in the country’s most expensive markets. However, low mortgage rates, rising incomes, and government interventions—like the First Time Home Buyer Incentive program launched in September—could help eager buyers stretch their budgets.
What does it mean for you?If you have the ability and desire to buy a home, act soon before prices go up. Economists expect both home values and rental costs to rise this year, so you’re likely to pay more the longer you wait.
HOUSING STARTS WILL STABILIZE
In 2017, Canadian housing starts reached a 10-year high. But as the real estate market slowed, builders pulled back. The CMHC expects both single-family and multi-unit construction activity to stabilize this year and to rebound by the end of 2021 to levels consistent with historical averages, although well below the 2017 peak.
Economists at the CMHC speculate that “the support to new residential construction from the expected improvement in economic activity and incomes will be offset by the projected slowing in household formation over the forecast horizon.”
According to PwC’s latest “Emerging Trends in Real Estate” report, condominiums continue to dominate new construction in Canada. Their relative affordability has made them a favourite of both first-time buyers and investors looking to fulfill a growing demand for rental units. However, a narrowing price gap between condos and detached housing could shift builder momentum towards single-family homes.
What does it mean for you?If you’ve had trouble finding a suitable home in the past, new construction may become an increasingly available option. We can help you assess both current and upcoming developments in our area.
WE’RE HERE TO GUIDE YOU
While national real estate numbers can provide a “big picture” outlook, real estate is local. As local market experts, we can guide you through the ins and outs of our market and the issues most likely to impact sales and home values in your particular neighbourhood.
If you’re considering buying or selling a home in 2020, contact us now to schedule a free consultation. We’ll work with you to develop an action plan to meet your real estate goals this year.
- RBC Economics
- Canada Mortgage and Housing Corporation
- Canadian Real Estate Association
- Huffington Post
- RBC Economics
- Huffington Post