home ownership home prices affordability

Home prices expected to climb 1.7 per cent next year

Thursday, December 20, 2018

According to the recently released RE/MAX 2019 Housing Market Outlook, the average sales price of a home is estimated to increase by 1.7 per cent. Housing markets across Canada stabilized in 2018 following the unprecedented increases in average sales price in many markets in 2017. However, some regions are expected to see average home prices far outside the average, particularly in areas outside of the main urban areas, including Chilliwack (+13 per cent), Windsor (+13 per cent), London (+17 per cent) and Charlottetown (+11 per cent).

It is predicted that the housing market will continue to stabilize, as Canadians will begin to feel the sting of higher interest rates as they re-commence their home buying plans in 2019. A recent survey found 31 per cent of Canadians said higher interest rates have not impacted their ability to get an affordable mortgage thus far. However, it is expected that in 2019, that may no longer be the case. A separate survey of RE/MAX brokers and agents found 83 per cent expect rising interest rates will make it more difficult for Canadians to buy a home in 2019.

In British Columbia, reduced foreign buyer activity has allowed more local buyers into Greater Vancouver’s condo market. While the average sales price for all properties climbed two per cent, from $1,030,829 in 2017 to $1,049,362 in 2018, the number of residential sales dipped 30 per cent. The low absorption rate is predicted to drive down average residential sale prices in 2019 by three per cent.

In Kelowna, the number of sales similarly fell 33 per cent on an annual basis. Rising interest rates, government policy changes and the mortgage stress test were all partially responsible for the decline, which is expected to continue into next year. Average home sale prices climbed six per cent on an annual basis from $674,930 last year to $718,915 in 2018, with prices expected to fall by three per cent in 2019.

In Alberta, slowing economic conditions have contributed to a decrease in average residential sale prices in Edmonton, dropping from $393,003 in 2017 to $379,539 in 2018. However, the luxury market is thriving in the province, as prospective investors in cannabis and migrant speculators driving this new segment. In Calgary, the market is predicted to stay relatively flat next year due to its reliance on the oil and gas industry, and further hurdles, such as the mortgage stress test.

However, Winnipeg has experienced a moderate increase in average residential sale price, climbing from $315,720 last year to $323,001 this year. In 2019, home prices are forecast to continue climbing, with an expected increase of four per cent. Although seniors seem to be downsizing, immigration to Winnipeg from regions such as Toronto and Vancouver (approximately 15,000 people move to Manitoba every year) is expected to drive sales activity going into 2019. In Saskatchewan, both Regina and Saskatoon are in a buyer’s market, which is expected to continue into 2019.

Meanwhile, rising interest rates and the mortgage stress test were the two major factors affecting housing market activity in 2018 in Toronto, with average sale prices falling four per cent from $822,572 in 2017 to $789,181 in 2018, and unit sales down by 16 per cent. A lack of affordable single-detached homes will make it difficult for buyers looking to enter the freehold market. The resale condo market, however, now represents nearly 37 per cent of total residential sales, with its relative affordability driving the rise of vertical growth. The average price of a home is predicted to climb two per cent in 2019.

Regions such as Ottawa and London are sellers’ markets, experiencing increased growth in average home sale prices. This trend is forecast to continue next year, however rising interest rates and the stress test continue to make it more difficult for prospective buyers in other regions, such as Barrie, Oakville and Durham regions.

Meanwhile, in Halifax, Saint John and St. John’s have all experienced stable price appreciation this year. Detached homes continue to be the most in-demand property type, as Atlantic Canada’s aging population and retirees are driving the condominium market. The economic slowdown and falling oil prices in St. John’s have led to a buyer’s market, but activity is expected to speed up in the second half of 2019.

“The drop in sales in key markets across British Columbia can be partially attributed to Canadians’ increasing difficulty in getting an affordable mortgage in the region,” said Elton Ash, regional executive vice president, RE/MAX of Western Canada, in a press release. “The situation created by the introduction of the mortgage stress test this year, as well as continually increasing interest rates, means more Canadians will be priced out of the market.”

According to the 2019 RE/MAX Housing Market Outlook Omnibus Survey, which surveyed 1,547 Canadians online, 36 per cent of Canadians are considering making a home purchase in the next five years, down from 48 per cent at the same time last year. The decrease comes down to actual and perceived impacts of the mortgage stress test and rising interest rates on housing affordability.

Thirty-one per cent of survey respondents said higher interest rates have not impacted their ability to get an affordable mortgage so far, but the risk of future interest rate hikes could affect these potential homebuyers in 2019.

Liveability continues to be an important factor to Canadian homebuyers, with 52 per cent of survey respondents wanting to live closer to green spaces, while 35 per cent would like to live closer to work. Forty-seven per cent of those surveyed said they would like better access to public amenities, while 37 per cent responded that they would like to live closer to public transit. When it comes to recreational cannabis, 65 per cent of survey respondents said they do not wish to live near a retail cannabis store.

Leave a Reply

Your email address will not be published. Required fields are marked *