The average condo price in the Greater Toronto Area is expected to increase 6.0 per cent year-over-year in 2020, rising to $600,000, according to the new Royal LePage Market Survey Forecast.
Meanwhile, a two-storey detached home in the GTA is forecasted to reach $1,027,200, a 4.5 per cent jump.
Overall, Canadian home prices are expected to see a healthy increase in value over time by the end of next year. The condo and detached markets are showing similar price growth at 3.6 per cent and 3.1 per cent to $506,100 and $785,400.
The report suggests millennials across Canada are shifting to houses over condos because of the drop in high price appreciation in the condo market. This shift is expected to spark more sales activity in the suburbs.
Overall, the Canadian real estate market is poised to appreciate 3.2 per cent, with the Greater Montreal Area seeing the highest increase due to its healthy economy with good employment, affordable real estate and strong consumer confidence.
A segment of potential homeowners that once put home purchasing on hold beginning in January 2018, due to the introduction of the mortgage stress test, started returning to the market in the second half of 2019, driving competition and demand.
Canada’s growing immigration rate is another driver of demand.
Phil Soper, president and CEO, Royal LePage, said the forecast assumes healthy economic conditions will be ongoing, but a slowdown could lead to a revised outlook.
Millennials drive shift in demand from condos to houses
Across Canada, millennials between the ages of 26 and 32 are shifting preferences to detached houses over condos in order to accommodate families.
Comparing the national median price of a condominium at the end of 2019 with 2014, the price has increased 48 per cent. Now this demographic is looking for more space and a yard. The resulting demand will put upward price pressure on detached homes. However, condos will remain in demand in regions where affordability restricts choice of housing types.
“This huge wave of Canadian consumers has been transforming Canadian real estate for a decade, putting more focus and upward price pressure on our condominium housing stock,” said Soper. “With kids in hand and dog on leash, these parents are now eyeing the suburbs that their baby boomer parents so coveted. We predict that the period of disproportionately higher price appreciation in the condo segment is drawing to a close as interest in detached homes is reborn.”
Regional appreciation drivers
In Greater Vancouver, house price appreciation is expected to stabilize in 2020 after declining in 2019, with the total price of a home rising to $1,125,200. Overall, British Columbia’s outlook is positive. The province’s economic indicators continue to be bullish, and most forecasters expect growth in B.C. to be above the national average next year.
The Greater Montreal Area and Ottawa’s aggregate home prices are forecast to increase 5.5 per cent and 4.5 per cent to $457,900 and $516,200, respectively, in 2020 compared to 2019.
Calgary and Edmonton are expected to see modest home price gains in 2020 as prices began to stabilize on a quarter-over-quarter basis in 2019.