The Canadian Real Estate Association (CREA) has updated its forecast for home sales activity for 2017 and 2018. Housing market trends continue to vary greatly among regions, especially in British Columbia, the Greater Golden Horseshoe and provinces that depend on oil and natural resource production.
In British Columbia, activity is showing early signs of recovering from the correction that occurred last year in some regions of the province. The CREA says this suggests home buying sentiment may be starting to improve.
In Ontario, evidence suggests that housing market sentiment has similarly cooled following the provincial government’s introduction of the Fair Housing Plan. Trends for the province are softening, with home sales and price growth in the Greater Golden Horseshoe area slowing.
In Alberta, Saskatchewan, and Newfoundland and Labrador, sales activity is still low as supply remains elevated. This has resulted in slightly softer price trends in Alberta and Saskatchewan, while Newfoundland and Labrador faced more pronounced price declines. Despite this, Alberta’s sales activity has firmed up compared to the low it reached in early 2016 and the balance between supply and demand in the province has been tightening. In comparison, the balance between supply and demand in Saskatchewan and Newfoundland favours buyers.
Housing markets in Manitoba, Northern and Eastern Ontario, Quebec, New Brunswick, Nova Scotia and Prince Edward Island all had rising sales in 2016, which helped draw down previously elevated levels of supply. So far in 2017, more balanced market conditions have remained in all of these regions.
Access to financing and affordability for potential home buyers has been reduced by tighter federal regulations announced late last year, together with recent increases in mortgage default insurance premiums and the changes to Ontario housing policies. Since the changes were only implemented recently, the combined impact of policy changes on home buyer and seller sentiment, sales, listings and the balance between the two pose potential upside and downside forecast risks.
Nationally, sales activity is expected to decline by 1.5 per cent to 527,400 units in 2017. This remains relatively unchanged compared to CREA’s previous national forecast, with an upward revision to the sales forecast for British Columbia offsetting a downward revision to Ontario’s projected results.
Sales in British Columbia are still expected to decline in 2017 compared to the all-time record in 2016 of a nine per cent drop. Newfoundland & Labrador is also forecast to see a large sales decline in 2017 (-11.7 per cent), continuing the trend that has occurred for nearly a decade. Smaller declines in activity are forecast for Saskatchewan (-4.4 per cent), Ontario (-2.1 per cent) and Prince Edward Island (-5.3 per cent).
Alberta is expected to have the largest increase in activity in 2017 (+10.2 per cent), but this increase still leaves sales in the province below its 10-year average.
In other regions, sales activity this year is expected to be little changed compared to last year’s levels in Manitoba (+0.3 per cent) and Nova Scotia (-0.4 per cent). In Quebec and New Brunswick, however, sales are predicted to increase modestly (+3.6 per cent and +1.9 per cent, respectively).
The national average price is expected to climb 7.4 per cent to $526,000 in 2017. Ontario is projected to post the largest average price gain this year (+16 per cent), which would still represent a moderation from where it is currently.
Only Newfoundland and Labrador (-5.4 per cent) and Saskatchewan (-1.6 per cent) are predicted to see average price declines in 2017, in line with historically elevated supply in these two provinces. Average price gains are forecast to sit within the two to three per cent range in most other provinces this year.
In 2018, national home sales are predicted to total 523,200 units, a decline of 0.8 per cent compared to the 2017 forecast. Most of the annual decline is expected to be caused by fewer sales in British Columbia and Ontario following expected interest rate increases later this year.
The national average price is forecast to climb by 1.8 per cent to $535,400 in 2018, with an expected gain of about five per cent in Ontario balancing a drop of nearly four per cent in British Columbia. The expected increase in Ontario home sales reflects an anticipated calming of home buying sentiment and modest rebound in sales in the Greater Golden Horseshoe region. The expected decline in average price for British Columbia homes is also in part compositional, as Vancouver sales are likely to decline as mortgage interest rates rise.
Saskatchewan and Newfoundland and Labrador are projected to see small average price declines next year, with home price increases predicted for other regions more or less tracking overall consumer price inflation in 2018.