While economic and demographic conditions remain encouraging for housing demand in many regions across Canada, policy headwinds and rising interest rates are restricting access to mortgage financing and negatively impacting homebuyer sentiment, according to the Canadian Real Estate Association (CREA)’s updated forecast for home sales activity in 2019. At the same time, home price growth has slowed significantly in some regions. In fact, home prices are falling in parts of the country where the supply of available homes is elevated relative to sales.
National home sales were predicted to post a sizable decline in 2018, falling to the lowest level in five years despite supportive population and job growth. In 2019, home sales activity and prices are expected to be reined in by recent policy changes from different levels of government, as well as additional interest rate increases.
The national forecast has been revised lower following CREA’s September forecast as a predicted rebound in British Columbia home sales has so far failed to take place, the recovery in Ontario sales this summer has now come to a close, and sales activity in Alberta has fallen. These developments were partially balanced by stronger than expected sales figures in Quebec. National sales are now predicted to fall by 11.2 per cent to 458,200 units in 2018.
British Columbia and Ontario accounted for the majority of the national sales decline in 2018. Alberta, Saskatchewan, Manitoba and Newfoundland and Labrador are also expected to fall to multi-year lows. In comparison, activity remains historically strong in Quebec and the Maritime provinces, particularly New Brunswick.
The national average price is predicted to fall 4.2 per cent year-over-year to $488,600 this year. This decline has been mostly compositional, reflecting slowing sales in British Columbia and Ontario, the two most expensive provinces in the country. The predicted decline in the weighted national average price (weighted by annual sales by province over the last 10 years), sat at one per cent.
Over half of all provinces including British Columbia are forecast to report average price increases in 2018. The average price decline expected for Ontario (-2.6 per cent) is largely due to fewer higher-priced home sales in Toronto, particularly during the spring, which ordinarily sees a seasonal increase in the average price but did not occur in 2018. In comparison, the seasonal jump in Toronto’s average prices during spring 2017 was unusually strong, which contributed to the annual decline in the province’s average home price this year.
Eastern Ontario, Quebec, New Brunswick, Nova Scotia and Prince Edward Island are all expected to see rising home prices due to a market that is steadily becoming more balanced in recent years.
Home prices are predicted to fall by about 2.5 per cent in Alberta and Saskatchewan and by about two per cent in Newfoundland and Labrador. These regions have seen an elevated supply of homes available to sale, compared to sales activity. The imbalance has deteriorated over the past year.
National sales are projected to only fall 0.5 per cent in 2019 to 456,200 units as rising interest rates combined with the mortgage stress-test offsets continuing population, job and income growth. CREA expects a nine-year low for Canadian home sales. Meanwhile, British Columbia and Alberta are predicted to see further activity declines, offsetting a small rebound in Ontario and continuing growth in Quebec.
The national average price of a home is expected to rebound by 1.7 per cent in 2019, growing to $496,800, reflecting average price growth ahead of consumer price inflation in Ontario, Quebec, New Brunswick and Nova Scotia, as well as a recovery in Ontario sales activity as a share of overall national sales. Slight gains are predicted for British Columbia, Manitoba and Prince Edward Island. In comparison, prices are projected to continue falling in 2019 in Alberta, Saskatchewan and Newfoundland and Labrador.