In 2017, single-family detached home and condo markets split off into two different paths in Canada’s two highest-priced real estate markets, Greater Vancouver and the Greater Toronto Area (GTA), a trend that is expected to continue into 2018, according to RE/MAX’s 2018 Housing Market Outlook report. The report states that this year, a mix of relative affordability for condo units, price appreciation for detached homes and government policy changes for both regions are helping push more potential home buyers towards condos.
In Greater Vancouver, demand for condominiums continues to surpass supply, resulting in the average price of a condo climbing an estimated 16 per cent on an annual basis, from $553,604 in 2016 to $645,778 in 2017. In the GTA, condo prices climbed 22 per cent in 2017, as the average sale price rose from $429,241 in 2016 to $523,437 in 2017. This considerable price appreciation was not matched for single-family detached homes, as prices remained relatively stable year-over-year in Greater Vancouver and up a more modest eight per cent in the GTA in 2017.
According to a survey conducted by Leger on behalf of RE/MAX, the desire for home ownership remains strong for 48 per cent of Canadians that are considering purchasing a home within the next five years. For those respondents, the top three reasons for purchasing a home is to upgrade their current home, to purchase a starter home as a way to enter the housing market and to upsize from their current home to adjust to a larger family. The survey also found that outdoor space was a key factor for many Canadians when considering purchasing a home, as 87 per cent agreed that access to green space was important to them and 82 per cent reporting that having a backyard was important.
In order to find a balance between the home features they’re looking for and affordability, many home buyers are continuing to look at real estate markets outside of the country’s largest urban centres. These buyers leaving more popular housing markets, including the GTA and Greater Vancouver, have contributed to increased demand and considerable annual average price increases in Kelowna (nine per cent), London-St. Thomas (18 per cent), Hamilton-Burlington (15 per cent), Barrie (19 per cent), Durham Region (19 per cent), Niagara (23 per cent), Kingston (eight per cent) and Ottawa (nine per cent).
Much of the activity seen in regional markets across the province was caused by price appreciation in Toronto during the first four months of the year before the Ontario government introduced the Fair Housing Plan. The 16-point plan introduced a 15 per cent tax for foreign buyers, which slowed demand from these buyers in the upper end of the market. In general, the policy changes curtailed activity significantly for single-family detached homes throughout the GTA on a short-term basis.
The new OFSI mortgage qualification rules that came into effect on Jan. 1, 2018, also impacted housing market activity toward the end of 2017 and are expected to slow real estate activity across Canada in the first part of 2018. Towards the end of 2017, a number of regions, including Fraser Valley, Edmonton, Regina, Winnipeg, Mississauga and Oakville experienced increased demand from buyers looking to purchase homes before the new stress test regulations took effect.
“Following increased fall market activity in some regions, we anticipate the new mortgage stress test to slow activity across Canada during the first few months of 2018,” said Elton Ash, regional executive vice president, RE/MAX of Western Canada, in a press release. “We anticipate the greatest impact of decreased buyer purchasing power to be in Victoria, Greater Vancouver, Kelowna, North Bay, London-St. Thomas, Barrie, Hamilton-Burlington, the GTA, Durham Region, Kingston, Ottawa, Halifax and St. John’s.”
As oil prices continue to stabilize, both Calgary and Edmonton have experienced a modest increase in average residential sale prices in 2017. In Calgary, the average residential sale price climbed by approximately two per cent to $487,931, up from $478,100 in 2016. Buyers and sellers remain tentative, but the city’s evolution into a major tech and distribution hub (for one, Amazon plans to open a key distribution centre in the city) is expected to increase confidence in the region’s real estate market. In Edmonton, sales rose by about five per cent year-over-year, from $357,916 to $375,788 in 2017, with a variety of new infrastructure projects rising in the city, including construction on the Valley Line expansion of the LRT system.
The RE/MAX 2018 average residential sale price expectation for Canada is an increase of 2.5 per cent as the desire for home ownership remains strong, especially among millennials.
To read the 2018 RE/MAX Housing Market Outlook report, click here.