The updated housing market forecast for 2017 and 2018 from the Canadian Real Estate Association (CREA) finds that national housing market trends continue to diverge significantly across regions.
The CREA forecast says that as activity in British Columbia’s Lower Mainland cools from the all-time highs recorded early last year, sales and price pressures in other regions of the province remain strong.
In Alberta, Saskatchewan, and Newfoundland and Labrador, sales activity is still low while supply remains elevated, resulting in weakened price trends for these provinces. Meanwhile, housing markets in Manitoba, Eastern Ontario, Quebec, New Brunswick, Nova Scotia and Prince Edward Island all experienced more activity in 2016 than years prior, resulting in rising sales and declining supply.
In the Greater Toronto Area and the Greater Golden Horseshoe, the balance between supply and demand has tightened. This is expected to lead to continued double-digit price growth, causing further erosion in affordability and sales activity if new supply remains low.
Recently tightened mortgage rules, higher mortgage default insurance premiums and a rise in mortgage interest rates are obstacles to affordability in all Canadian housing markets, but the CREA says it will be some time before their full impact on housing markets is evident.
In certain regions, some first-time buyers may rethink how much they can afford and end up shopping for a lower-priced home, due to the recently tightened “stress test” for mortgage financing qualification. In regions where there is short supply of lower-priced inventory, some sales may be delayed as buyers choose to save longer to put down a larger down payment.
In markets like Vancouver and Toronto, some buyers may find themselves priced out of the market entirely, due to short supply of single family homes and few affordable options. In Toronto, the stress test for mortgage qualification may lead some buyers to select a home further out in the Greater Golden Horseshoe region, where homes are more affordable.
Nationally, sales activity is expected to fall by three per cent to 518,700 units in 2017. As mentioned in CREA’s previous forecast, the climbing sales forecast for Ontario offsets a downward revision to British Columbia’s forecast sales.
British Columbia sales are expected to drop 17.5 per cent in 2017, the largest decline forecast, followed by Prince Edward Island, which is expected to see sales fall 10.8 per cent. Activity in both provinces is receding from the all-time highs reached last year. Newfoundland and Labrador is expected to see a decline of 8.4 per cent in sales this year.
Alberta is forecast to see a sales increase of five per cent in 2017, the largest jump in activity projected for 2017, but this figure still remains nearly 10 per cent below the 10-year average.
In other regions, sales activity may only vary slightly from 2016 to 2017. Ontario sales are expected to climb less than one per cent this year due to strong demand and an increasingly acute supply shortage.
In provinces where the housing market is closely tied to the outlook for oil and other natural resource industries, average prices may stabilize in Alberta while slowing in Saskatchewan and Newfoundland and Labrador.
Although prices are still climbing at a rapid rate in Ontario, British Columbia has seen slowing sales in its Lower Mainland region, which is reflected in a drop in average price. Average prices in other provinces are either climbing slightly or remaining level, reflecting well-balanced supply and demand.
The national average price is expected to rise 4.8 per cent to $513,500 in 2017, with significant regional variations. The average price is forecast to drop by more than five per cent in British Columbia and Newfoundland and Labrador, and by 2.8 per cent in Saskatchewan, yet is expected to climb more than 15 per cent in Ontario.
In other provinces where the average price showed signs of improvement in 2016, average price gains are forecast to remain below the rate of inflation in 2017 as the impact of recent regulatory changes and higher expected mortgage rates support stronger demand and tighter market conditions.
In other provinces where the average price showed tentative signs of improving last year, average price gains are forecast to stay below the rate of inflation in 2017 as the impact of recent regulatory changes and higher expected mortgage rates lean against stronger demand and tighter market conditions.
In 2018, national sales are expected to reach 513,400 units, a decline of one per cent compared to 2017 projections. Most of this decline is expected to be caused by fewer sales in Ontario.
The national average price is forecast to increase by five per cent to $539,400 in 2018, reflecting ongoing market tightness in Ontario and the further normalization of B.C.’s market. Price gains outside of the Greater Golden Horseshoe are not expected to reach the increase in the national average price.
Projections for Saskatchewan and Newfoundland and Labrador say average prices will decline in 2018 by less than one per cent. In other regions of Canada, home price increases are forecast to more or less track overall consumer price inflation in 2018.