Canadian home prices rise 8.8%

But real estate market continued its slowdown in February

The Canadian real estate market continued its slowdown in February, with the number of homes sold declining 1.6 per cent compared to the previous month and dropping 5.9 per cent from a year ago. The sales drop was the smallest year-over-year decline in nine months, the Canadian Real Estate Association said, but it underscores the market returning to a more balanced level from the highs it experienced through the early part of 2010.

"Most local housing markets in Canada are well balanced, but there are still a number of buyers’ and sellers’ markets," CREA president George Pahud said Tuesday.

Price gains, however, are anything but balanced. The national average rose 8.8 per cent year-over-year to $365,192 in February. The average price has been skewed higher nationally and in British Columbia recently by a record number of multimillion-dollar sales in a couple of areas in and around Vancouver, said CREA's senior economist, Gregory Klump.

"When you take Vancouver out of the equation, the year-over-year increase in the national average price drops to 3.4 per cent," Klump said.

Listings rose 1.5 per cent from the previous month, building on the 4.3 per cent gain in January. The rise is consistent with CREA’s expectation that many sellers, who shied away from listing their home last summer when the national housing market softened, would put their homes for sale early in 2011, now that they're confident better prices have returned.

Inventory, a key real estate metric that measures the number of months it would take to sell the entire housing stock at the current sales pace, stood at 5.7 months at the end of February on a national basis. This is little changed from the 5.5 months reported in January, when it reached the lowest level since last April.

New mortgage rules announced by the Finance Department in January and set to begin Friday will make the maximum payback period 30 years — resulting in somewhat higher regular payments than with the 35-year amortization that has been the choice of about 30 per cent of home buyers.

The rule changes will increase the monthly payment on a $300,000 mortgage at four per cent interest by $105, but will also reduce total interest paid by $42,288 over the life of a mortgage because it's repaid five years sooner.

CREA expects the rules will begin to put a lid on prices starting next month, as less buyers will be able to come up with the shorter terms and higher monthly payments they bring.

"National average price gains may recede after tighter mortgage regulations take effect in March," Klump said

March 15, 2011 in Canadian Market Forecast | Permalink | Comments (9) | TrackBack

Real Estate Marlet Outlook for 2011

Residential values expected to climb further in 2011 as housing sales stabilize

Although improved economic fundamentals will have a positive impact on Canadian housing markets moving forward, the forecast for residential real estate sales remains static in most major centres in 2011, according to a report released today by RE/MAX.

The RE/MAX Housing Market Outlook 2011, examining trends and developments in 26 major centres across the country, found that home-buying activity in 2010 fell short of 2009 levels. Housing values, however, continued to climb, with virtually all areas reporting an upswing in average price, ranging from just under one per cent to 15 per cent this year. Lower inventory levels in many markets offset the effects of diminished demand, propping-up price in almost every instance. Kitchener-Waterloo, Quebec City, and St. John’s saw the greatest increases in average price this year, while Eastern Canadian markets including Hamilton-Burlington, Sudbury, Windsor, Moncton and Prince Edward Island were the only markets that bucked the downward trending in home sales in 2010.

By year-end, approximately 441,000 homes are expected to change hands nationally, a five per cent decline from the 465,251 sales reported in 2009. Housing values are forecast to continue to climb, up an estimated seven per cent to $340,000, compared with $320,333 one year earlier.

“In terms of resale housing activity, what many are talking about as the new normal is actually a return to the traditional real estate cycle,” says Michael Polzler, Executive Vice President, Regional Director, RE/MAX Ontario-Atlantic Canada. “The past decade was truly unprecedented—never before have we experienced a run up that was as strong or lasted as long. As we have digressed from the typical pattern, people have forgotten what the usual healthy cycle looks like, but all the hallmarks are there. Ample inventory levels, steady demand, and moderate growth, both in terms of sales and prices, will characterize the market in 2011. While the pace may appear lackluster in comparison to what we’ve grown accustomed to, it underscores the principles of real estate 101: The market is cyclical. All boats rise and fall with the tide.”

Greater stability is expected to characterize the markets in 2011, with Canadian housing sales predicted to mirror 2010 levels at 441,000 next year, while average price is forecast to escalate three per cent to $350,000 by year-end 2011.

“Looking forward, we see steady improvement in provincial and local economies—which will bode well for housing markets across the board,” says Elton Ash, Regional Executive Vice President, RE/MAX of Western Canada. “The relentless drive in the market reminiscent of years past will be gone and instead, we can expect to see more normal, balanced market conditions, with buyers maintaining a slight edge.”

Markets in British Columbia are forecast to lead the country in terms of percentage increases in sales activity next year, with Greater Vancouver expected to climb 10 per cent, followed by Victoria at eight per cent and Kelowna at six per cent. After a prolonged period of economic hardship, Windsor is once again on track for growth, with residential home sales predicted to climb five per cent.

Almost all markets are reporting an anticipated increase in housing values next year, with St. John’s in Newfoundland-Labrador in front with an estimated eight per cent hike in average price in 2011. The value of homes in Greater Vancouver, Kelowna, Regina, Saskatoon, London-St. Thomas, Ottawa, Sudbury and Greater Montreal is also predicted to climb five per cent.

“Low interest rates and improving consumer confidence levels should stimulate home-buying activity at all price points next year,” says Sylvain Dansereau, Executive Vice President, RE/MAX Quebec. “Overall gains will be more muted—a welcome reprieve for purchasers. 2011 will be a year that will see more widespread recovery across a broader array of economic sectors, setting the stage for a better 2012.”

In the meantime, a number of factors will continue to support sustained sales and price growth in the months and years ahead:

See the Real Estate Marlet Outlook Report »

December 7, 2010 in Canadian Market Forecast | Permalink | Comments (4) | TrackBack

CREA Revises Real Estate Forecast

The Canadian Real Estate Association (CREA) has lowered its forecast for home sales activity via the Multiple Listing Service® (MLS®)Systems of Canadian real estate Boards and Associations for 2010 and 2011. Sales activity in the third quarter of 2010 began on a weak footing, but gained traction as the quarter progressed. Improving momentum for home sales activity suggests the resale housing market is stabilizing, but weaker than expected third quarter activity has reduced CREA’s annual forecast.

National sales activity is now expected to reach 442,200 units in 2010, representing an annual decline of 4.9 per cent. While monthly levels for sales activity are stabilizing, year-over-year comparisons are likely to remain stretched well into 2011 due to the record-level activity reported in late 2009 and early 2010.

Lackluster economic and job growth, muted consumer confidence, and the resumption of interest rate increases are expected in 2011. Against this economic backdrop, national home sales activity is forecast to decline by nine per cent to 402,500 units.

“Interest rates are expected to resume their return to more normal levels next year, but will still be at levels that are friendly to the housing market,” said Georges Pahud, CREA’s President. “For the tenth year in a row, more than 400,000 homes are expected to change hands over the MLS® Systems of Canadian real estate Boards and Associations next year.”

Levels for sales activity and new listings have swung widely until recent months. Despite their volatility, movements in sales activity and new listings have remained in synch and have kept the resale housing market balanced since early 2010. The overall supply of homes for sale has also been trending lower in recent months. The resale housing market has remained balanced on a national basis and in most provinces, resulting in stable average price trends.

The national average home price is forecast to rise 3.1 per cent in 2010 to $330,200, with increases in all provinces. The small revision to CREA’s average price forecast reflects changes to the forecast for provincial sales activity and corresponding provincial contributions to the national average price calculation. The balance between supply and demand is forecast to remain stable, resulting in stable price trends.

Modest average price gains are forecast in 2011 in all provinces except British Columbia, Alberta, and Ontario. Lower sales activity in British Columbia and Ontario are expected to result in a 1.3 per cent decline in the national average price to $326,000.

“Housing demand and supply is stabilizing,” said Gregory Klump, CREA’s Chief Economist. “That’s good news for home buyers, who will feel less hurried to make an offer than they did when transitory factors ignited housing demand in early 2010. It’s also good news for home sellers, who will feel more confident about price stability now that the housing market has become balanced.”

"Interest rates are widely expected to remain low for some time due to recent downward revisions by the Bank of Canada to its outlooks for economic growth and inflation. Consumer sentiment will likely remain under pressure until economic prospects improve meaningfully,” said Klump.

“In the meantime, many households will be focused on paying down their debts before the Bank of Canada resumes hiking interest rates next year,” Klump added. Economic uncertainty is likely to keep potential homebuyers in a cautious mood, so the continuation of low and stable interest rates is unlikely to cause housing demand or prices to swell.”

November 5, 2010 in Canadian Market Forecast | Permalink | Comments (8) | TrackBack

Royal LePage forecasts market for 2010

Canadian real estate market to continue strong gains in the first half of 2010 with demand and supply finding balance in the second half of the year.

Canada’s residential real estate market is forecast to remain unusually strong through the first half of 2010 as economic conditions across the country improve and the stimulus impact of low interest rates continues to stoke demand, according to today’s Royal LePage House Price Survey and Market Survey Forecast. As confidence in the recovery builds in early 2010, increases in average house price levels and overall market activity are expected to continue. The gradual erosion of affordability driven by higher house prices and the expected late-year modest upward movement of interest rates, together with an improvement in listings supply as confidence improves, are expected to bring the market back into balance in the second half of the year, when home price increases are expected to moderate.

“The Canadian real estate market enters 2010 with considerable momentum from a unusually strong finish to the previous year, said Phil Soper, president and chief executive, Royal LePage Real Estate Services. “The stimulus effect of low borrowing costs has contributed to a sharp rise in demand that has driven activity levels to new highs. This demand, coupled with a typical seasonal undersupply of homes for sale, should cause home prices to continue to appreciate significantly during the early months of the year. Improving supply as the year unfolds and easing demand as the cost of home ownership rises should moderate home price increases in the second half of 2010.”

In contrast to the difficult months during the worst of the recession, house prices appreciated during the later part of 2009, with fourth quarter price averages surpassing averages from the fourth quarter 2008. The average price of detached bungalows rose to $315,055 (up 6.0%), the price of standard two-storey homes rose to $353,026 (up 5.2%), and the price of a standard condominium rose to $205, 756 (up 6.4%). The first two quarters of 2009 saw significant year-over-year price declines across the housing types surveyed and the third quarter provided the first signs saw a strong rebound in Canadian home values.

Regions that saw the strongest declines during the recession are now showing marked gains. Those regions include Toronto and the Lower Mainland, B.C. Vancouver in particular experienced a robust quarter, with home prices rising across all housing types surveyed.

“No other sector of the economy has been as highly affected by economic stimulus as housing,” commented Soper. “As consumer confidence has improved, Canadians have shown a lingering reluctance to acquire depreciating assets such as consumer durables, but have embraced the opportunity to invest in real property. Predictably, the regions benefiting most from this renewed interest in home ownership are those with lower average house prices and strong economic confidence, such as Winnipeg and parts of Atlantic Canada.”

Soper added, “Our forecast is built upon an expectation that interest rates will ease upward before the year’s end, which should have a dampening effect on demand, allowing it to come into balance with the supply of resale homes on the market. Further, we expect to see an increasing number of homes listed for sale as the year progresses – as Canadians regain confidence in the economy, they should be more willing to enter into a large financial transaction such as the sale of a home.”

Regional Market Summaries

Halifax saw varied gains across all surveyed housing types in comparison to fourth quarter 2008. Notably, more affordable homes posted the highest price increases due to the influx of workers returning from Western Canada.

Montreal saw strong gains this quarter as year-over-year price levels rose across all three housing types surveyed. Recent increases in demand have resulted in lower than normal inventory levels. Inventory levels are expected in increase in 2010. Continued demand is expected to result in moderate price levels.

House price levels in Ottawa are moderately higher this quarter compared to fourth quarter 2008 across all housing types surveyed. Fourth quarter sales activity did not slow as expected, and the demand has resulted in higher incidences of sellers receiving multiple offers, an unusual occurrence in end of year activity for this region. While inventory levels are low and there is competition among home buyers, this may abate as the government eases economic stimulus in 2010.

The Toronto market saw year-over-year price increases across the housing types surveyed in the fourth quarter. Of particular interest is the increase in sales of higher-priced units, which were hit hard by the recession over the previous 12 months. There was a surge of first-time buyers active in the market last year, depleting the inventory of entry-level units. They are expected to be joined by move-up, executive, and luxury buyers in the coming year, resulting in additional price appreciation.

Winnipeg saw some of Canada’s largest home price increases this quarter. More than one third of homes sold in the region went for above their asking price driven largely by first time buyer activity. This strong growth is expected to continue well into 2010.

Inventory levels in Regina are low, as much as thirty per cent lower than expected for this time of year; this situation should be corrected in the spring of 2010. House prices should continue to increase into 2010, driven by labour force growth in the construction industry.

Price levels in Calgary remain constant as the market is correcting from the record growth seen in the middle of the previous decade. Inventory levels are one quarter the levels seen in 2008, and the reduction in choice has delayed purchases. Activity and price levels are expected to increase modestly in 2010.

House price levels in Edmonton are also still correcting from the 2005 to 2007 boom. Low inventory levels have provided some price support, and activity is expected to increase in the spring of 2010.

Vancouver saw significant gains in price levels, with average increases of approximately ten per cent across the housing types surveyed. Inventory levels are beginning to decrease, and there has been an increase in sales involving multiple offers. Sales activity may drop off due to the city’s focus on the Olympics in the first quarter, but the market is expected to be robust for the remainder of the year.

Royal LePage’s quarterly House Price Survey (Q4 2009) shows the annual change of prices for key housing segments in select national markets. Click here to view the chart.

January 7, 2010 in Canadian Market Forecast | Permalink | Comments (3) | TrackBack

Resale Housing Outlook

The TD Bank Financial Group says:

The Canadian resale housing market has held up to its ‘first in – first out’ (FIFO) billing in this recession. Its downturn and recovery were also as Vshaped as can be. Sales and average prices have more than recovered. As of October, each stood 5% higher than its prior peak in late 2007.

Viewing this sharp two-year cycle as a ‘blip’ is misleading. The 12% price adjustment seen in the downturn was partly warranted by fundamentals, which leaves the current market in a state of mild over-valuation similar to that of late 2007.

While current price levels are not worrisome, the current market momentum has the potential to lead to significant price overshoot.

2010 should mark a transition from tight to balanced markets. Current price growth will elicit a positive supply response, while demand will ease as a result of the ongoing erosion of home affordability. By 2011, housing and the overall economy will experience a role reversal. While the economy will strengthen, resale housing market conditions will weaken.

See the full report »

December 2, 2009 in Canadian Market Forecast | Permalink | Comments (6) | TrackBack

MLS home sales forecast revised

Monthly MLS home sales activity continues to run strong, with new monthly records set in July, September, and October. This has prompted The Canadian Real Estate Association to revise its MLS home sales forecast for 2009 and 2010. CREA now forecasts national activity will reach 460,200 units in 2009, up 6.6 per cent from last year. CREA's previous forecast issued in August had annual sales this year about even with 2008 levels. The new sales forecast for 2009 puts activity about on par with annual activity in 2004, but below levels reported for the years 2005 through 2007.

British Columbia and Ontario are still forecast to post annual increases in activity this year, but the forecast has been lifted as a result of recent record level activity in both provinces. In addition, Alberta, Saskatchewan, Quebec, and Prince Edward Island are also now forecast to post an annual increase in activity in 2009. Forecast declines in annual activity have been trimmed for Manitoba and Nova Scotia, and are little changed for New Brunswick and Newfoundland and Labrador.

National MLS home sales activity is forecast to rise seven per cent to 492,300 units in 2010. This is a slightly larger rise in activity than previously forecast. This would make 2010 the second highest year on record for sales, putting activity below the peak reached in 2007, and slightly above the 2005 and 2006 figures. New annual records are forecast for Manitoba and Quebec in 2010.

The forecast increase in activity for 2010 reflects significant weakness in activity recorded in the first quarter of 2009. Monthly activity in 2010 is expected to trend downward from recent heights, but the sharp drop inactivity recorded in the in the first quarter of 2009 is not expected to repeat in 2010.

New listings began declining in the third quarter of 2008, as many sellers took their home off the market pending an improvement in housing market conditions. CREA's previous forecast suggested that average price increases in the second half of 2009 would likely result in mild a rebound in listings. In the third quarter of 2009, the number of new listings did post the first quarterly increase in more than a year, which coincided with the return of strong average price increases. New residential listings are expected to continue trending upward.

The national MLS average home price is forecast to climb 4.2 per cent in 2009, reaching a record $317,900. This is an upward revision from the 1.5 per cent gain in CREA's previous forecast, and reflects the high degree to which the national average price was skewed downward last year by a significant decline in activity in Canada's priciest markets, and then upward by the rebound in activity.

Alberta remains the only province with a forecast decline in average price in 2009 (-3.0 per cent). Average prices are forecast to rise in all other provinces, with gains ranging from a low of 1.5 per cent in British Columbia to 13.1 per cent in Newfoundland and Labrador.

Average prices are forecast to climb a further 4.7 per cent in 2010. Much of the annual increase reflects weakness in the average price in first quarter of 2009, which is not expected to repeat in 2010. Average sale prices are forecast to rise in every province in 2010.

The price trend is similar but less dramatic for the weighted national MLS average price, which compensates for changes in provincial sales activity by taking into account provincial proportions of privately owned housing stock. The weighted national MLS average price is forecast to climb 2.9 per cent in 2009, with a further 4.0 per cent rise in 2010. CREA previously forecast that the weighted national average price for MLS homes sales would hold steady from 2009 to 2010.

"Pent-up demand built in late 2008 and early 2009, as many buyers moved to the sidelines pending an improved economic outlook," said CREA President Dale Ripplinger. "With the economic outlook having improved since then, the release of that pent-up demand will boost activity over the rest of the year and in 2010."

"Significant weakness in activity and average prices seen in late 2008 and earlier this year is not expected to repeat in 2010, so 2010 will look a lot better by comparison," said CREA Chief Economist Gregory Klump. "The raised outlook for MLS sales activity in 2010 still puts annual activity below the pre-recession peak recorded for 2007."

CREA MLS Residential Market Forecast:

                                    2008              2009              2010
                                  Annual            Annual            Annual
    MLS residential           percen-           percen-           percen-
     unit sales                     tage    2009      tage    2010      tage
     forecast              2008   change  Forecast  change  Forecast  change

    Canada              431,823    -17.1  460,200      6.6  492,300      7.0
    British Columbia     68,923    -33.0   84,700     22.9   95,400     12.6
    Alberta              56,399    -21.0   58,050      2.9   64,800     11.6
    Saskatchewan         10,194    -15.4   10,700      5.0   11,400      6.5
    Manitoba             13,525     -2.9   13,050     -3.5   14,050      7.7
    Ontario             181,001    -15.2  191,700      5.9  200,400      4.5
    Quebec               76,762     -4.8   78,900      2.8   82,150      4.1
    New Brunswick         7,555     -7.4    6,950     -8.0    7,200      3.6
    Nova Scotia          10,869     -8.3   10,000     -8.0   10,550      5.5
    Prince Edward
     Island               1,413    -20.1    1,450      2.6    1,450      0.0
    Newfoundland          4,695      5.0    4,250     -9.5    4,300      1.2

                                    2008              2009              2010
                                  Annual            Annual            Annual
    MLS residential           percen-           percen-           percen-
     average price                  tage    2009      tage    2010      tage
     forecast              2008   change  Forecast  change  Forecast  change
    Canada              304,971     -0.7  317,900      4.2  333,000      4.7
    British Columbia    454,599      3.5  461,600      1.5  478,900      3.7
    Alberta             352,857     -0.9  342,300     -3.0  360,500      5.3
    Saskatchewan        224,592     28.8  233,200      3.8  244,700      4.9
    Manitoba            190,296     12.5  202,600      6.5  218,700      7.9
    Ontario             302,354      0.9  315,100      4.2  326,800      3.7
    Quebec              215,307      3.7  224,300      4.2  232,400      3.6
    New Brunswick       145,762      6.7  153,600      5.4  158,100      2.9
    Nova Scotia         189,932      4.9  196,000      3.2  204,100      4.1
    Prince Edward
     Island             139,944      4.9  146,900      5.0  150,700      2.6
    Newfoundland        178,477     19.6  201,900     13.1  213,600      5.8

Source: The Canadian Real Estate Association

November 16, 2009 in Canadian Market Forecast | Permalink | Comments (17) | TrackBack

Real estate sales forecast upgraded

Strong home sales in the summer have prompted the Canadian Real Estate Association to dramatically increase its forecast for sales figures for this year.

The agency is now predicting 432,600 units will change hands this year. That's only 0.4 per cent below the 2008 figure, and it's significantly more than the 14.7 per cent sales decline the agency was forecasting as recently as May. "The difference in the resale housing market now, compared to the beginning of the year, is night and day," CREA President Dale Ripplinger said. "And nowhere is this more evident than in the West."

British Columbia and Ontario are now forecast to post annual increases in activity this year, reflecting weak demand last year and a subsequent rebound. Forecast declines in annual activity were trimmed significantly in Alberta, Saskatchewan and Quebec and were also scaled back for New Brunswick and Nova Scotia.

For 2010, the agency is now forecasting a 5.3 per cent increase to 455,400 units. That figure is a smaller increase in activity than was previously forecast.

The main reason for the downgrade is that demand is shifting as buyers move ahead their purchase decisions to take advantage of low interest rates, said CREA chief economist Gregory Klump.

Slight price increase forecast

The agency is now forecasting the average home price to edge up 1.5 per cent in 2009, as the strong rebound in sales activity, not price, in some of Canada's most expensive markets continues to skew the national, and some provincial, average prices upward.

At -4.4. per cent, Alberta is the only province with a forecast decline in average price in 2009. Average prices are forecast to rise in all other provinces except British Columbia, where prices are expected to be flat. CREA's previous forecast predicted a decline in the national average price of 5.2 per cent in 2009.

The national average price is forecast to be up 2.1 per cent on a year-over-year basis in 2010.

August 30, 2009 in Canadian Market Forecast | Permalink | Comments (11) | TrackBack

Immigrants driving real estate market

At least two of Canada's big banks have found encouraging signs in the country's housing market, one financial and the other social. A commentary from TD Economics on Thursday said there are encouraging signs that a bottom may be forming under the Canada's depressed home building market, citing an 8% increase in housing starts in June on top of a 10.8% increase in May.

Although homebuilding activity overall remains one-third below the pace of a year ago, the report by TD economist Pascal Gauthier noted that the June climb "marks the second consecutive monthly increase in starts after a long string of nearly uninterrupted slides that started last fall."

On a regional basis, June's urban starts increase was lead by a 59.4 per cent surge in the Prairie region, followed by a 25 per cent gain in B.C., and a more modest 3.1 per cent increase in Ontario.

On the flipside, urban starts slid by 6.3 per cent in Quebec and 3.9 per cent in the Atlantic region. However, the bank said regions east of Ontario have generally not seen the same extent of decline as elsewhere.

Overall, the figures "provide more evidence that the Canadian economy has certainly passed the worst of what can be expected in terms of residential investment contraction," TD said.

Meanwhile, Scotia Economics issued a report Thursday saying it has been recent immigrants who have been driving housing demand in Canada.

The report cited census data that showed 72 per cent of immigrants lived in a dwelling owned by a household member in 2006, up from 68 per cent in 2001.

By comparison, the percentage of people born in Canada living in a dwelling owned by a household member rose only two percentage points over the same period, from 73 to 75 per cent.

Because the analysis was based on 2006 data, it was unclear what effect the current recession might be having on the number of immigrants and others entering the housing market.

But it was clear from the report that Scotiabank expects that trend in real estate to continue.

"Given Canada's aging population and relatively low fertility rates, longer-term household formation and housing needs will be largely determined by immigration," said senior economist Adrienne Warren.

Based on standard assumptions regarding immigration, fertility and mortality rates, Warren said immigration could account for 75 per cent of the growth in Canada's population a decade from now, up from 60-65 per cent today, and for almost all of it by 2030. Most of this growth will be in Canada's urban areas.

Among other things, the report highlighted that the faster transition to home ownership among immigrants was supported in part by strong labour markets, which saw the employment rate for core working-age recent immigrants jump 3½ percentage points between 2001 and 2006 to 67 per cent.

This was faster than the 1½ percentage point gain among their Canadian-born counterparts, which rose to 82.4 per cent.

"The better labour market performance of recent immigrants may reflect a favourable skills mix, with many employed in high-growth industries such as engineering, construction and skilled trades," Warren said.

"It may also reflect a greater geographic mobility to meet shifting regional labour requirements," she added.

Of the more than one million immigrants that came to Canada between 2001 and 2006, 69 per cent settled in the three largest metropolitan areas, Toronto, Montreal and Vancouver, according to the data cited by Scotiabank.

See Scotiabank's report on Real Estate Trends »

July 10, 2009 in Canadian Market Forecast | Permalink | Comments (3) | TrackBack

Stable Real Estate Market Forecast

Housing market sees bounce back from 'awful winter' —
Royal LePage revises forecast to the positive.

Canada’s resale housing market recovered lost ground in the second quarter and is poised to stabilize for the remainder of 2009, after a very slow start to the year, according to the Royal LePage Market Survey Forecast and House Price Survey released today. As the economy begins to stabilize and consumer confidence improves, house prices are expected to appreciate slightly in much of eastern and central Canada. Greater than national average price declines are predicted for the western cities that saw the greatest price inflation earlier in the decade, including Edmonton, Calgary and Vancouver.

“Given the grim shape that Canada's real estate market was in this past winter, the turnaround we have witnessed in the second quarter is really quite remarkable. We believe this improvement represents a sustainable change across the country. While seasonally weaker conditions are to be expected in the fall, the plucky Canadian real estate market is stabilizing and a healthy level of activity is forecast for the second half of 2009,” said Phil Soper, president and chief executive officer, Royal LePage Real Estate Services.

During the second quarter, average house prices across most Canadian markets began to appreciate, recovering from the lows experienced during the winter months. Average national prices remain slightly behind those posted during the same period in 2008. Of the housing types surveyed, the price of detached bungalows declined to $327,964 (-3.5 per cent), two storey property prices decreased to $392,378 (-3.7 per cent), and standard condominiums price points fell slightly to $237,112 (-3.8 per cent), year-over-year.

Soper observed, “With our industry’s busiest quarter behind us, we feel comfortable revising our 2009 forecast to the positive. When the anticipated market decline struck last winter, it was with greater speed and intensity than predicted, but the strength of the rebound was equally surprising. If general economic conditions continue to improve, as we expect they will, 2009 will be characterized as a period of moderate housing market correction after several years of above-average price growth.”

The 2009 national average house price is forecast to decline marginally by 2.0 percent, to $297,500 by end of year and unit sales are projected to fall slightly by 1.0 percent to 430,000.

“Improved affordability, driven by flat or lower home prices and inexpensive mortgage financing, has been the principle catalyst in this recovery. Pent up demand is also a factor in the lift we see in the second quarter numbers. For six months straddling the year's beginning, buyers stayed away from the market in an understandable, emotional reaction to very unsettled global economic conditions. Canadians appear to be stepping beyond these fears and are once again moving onto and up the home ownership ladder,” stated Soper.

In early 2009, the precipitous drop in unit sales remains the most dramatic indicator of the recession's impact on Canada's real estate market. With spring, consumers appeared ready to believe the worst was behind them and returned to the market in force, driving increased activity across each housing type. Couple this with historically low interest rates and leveling unemployment, Canada’s residential real estate market got back on track during the quarter.

Undergoing an inevitable cyclical correction, price adjustments can be seen with marked variances across Canada’s provinces. As expected, British Columbia and Alberta posted the most significant price modifications, as home values in those markets retreated in the wake of several mid-decade years of unsustainable price inflation, and have now evolved to a more balanced state. Prices appear to have stabilized and it is expected that these regions will continue to see improvements into 2010. In particular, the impact of lower home prices has improved affordability to the point that people are buying homes again on the West Coast, where sales activity has increased substantially.

Alternatively in Atlantic Canada, homes continue to appreciate due to strong local economies, which have helped to shelter the region somewhat from the turbulence witnessed in other provinces. As well, the region's generally moderate home prices have helped keep demand strong. Newfoundland, in particular, stands out as a region that continues to see significant home price appreciation, as supply cannot keep up with the demand driven by vibrant and growing industries such as those in the province's oil and gas sector.

Meanwhile, home prices in Toronto declined slightly in the second quarter, reflecting the national average trend. In the early spring, it was first-time buyers who triggered the increased activity levels, now those looking to move up are also active in the market. Similar to the situation in other large cities in central Canada, the most desirable neighbourhoods experienced supply shortages, which put upward pressure on prices.

“Looking ahead to the second half of 2009, year-over-year price comparisons will likely appear increasingly more favourable. It is important to remember that the baseline for the latter half of 2008 was unusually low, particularly in the fourth quarter when the full impact of the global financial crisis was felt. Our expectation is that most Canadian regions will experience stable housing prices through into the spring of 2010,” concluded Soper.

Regional Market Summaries


In Halifax, a stable economy has contributed to a healthy real estate market where average house prices increased modestly despite a slight dip in sales activity. The market is beginning to pick up following a slow first quarter. Pent up demand will see a return to a more active market in the last half of the 2009 with the anticipation of a slight boost in sales activity and average house prices growing at a leisurely pace.


The housing market in Montreal experienced a solid second quarter, with average house prices for most property types expected to increase for the remainder of 2009. Higher inventory levels resulted in balanced market conditions seeing the number of new listings equal to the number of sales. Low interest and unemployment rates will help maintain the strength of the real estate market through to the end of the year.


Ottawa continues to remain a steady market for residential real estate, with sales activity in the second quarter coming out strong from a slow first quarter. Ranked number two among Canada’s large cities for affordable real estate and coupled with low interest rates, all types of buyers were drawn to the market. House prices are expected to remain stable throughout the remainder of year with numbers slightly higher than anticipated.


In Toronto, the real estate market witnessed significant second quarter gains. The return of consumer confidence and an upswing in spring market activity brought house prices and unit sales down as buyers emerged to take advantage of affordable properties and low lending rates. As the market begins its transition from a buyer’s market to a balanced market, with indications of a seller’s market arising, it’s anticipated that the market will stabilize by the end of year.


Winnipeg’s real estate market has remained relatively resilient in the second quarter with average house prices in key housing segments increasing from the first quarter of 2009. Real estate in Winnipeg is modestly priced when compared to other cities in Canada, creating ideal conditions for buyers in the province. Looking ahead, average house prices are anticipated to stabilize for the remainder of the year.


Regina’s real estate market started on the road to recovery in the second quarter of 2009 and is expected to further improve through the remainder of the year. An increase in unit sales helped diminish the city’s high inventory levels as buyers are beginning to initiate deals. Recovering manufacturing and resource sectors, new construction activity in Regina, and low interest rates have also helped to improve buyer confidence.


With the economic downturn and the oil and gas industry struggling, the housing market in Calgary has been on the decline since 2008, after many years of price inflation at the beginning of the decade. Quarter one of 2009 revealed some signs of price increases and stabilization in certain areas in Calgary, but the second quarter reveals fluctuations in the market. These price fluctuations are occurring across Calgary in all housing types with the market forecast predicting price reductions for the remainder of 2009.


Housing market conditions in Edmonton were characterized by lower inventory levels and moderate house price increases. Buyer demand was strong during the second quarter as most buyers felt a sense of urgency to capitalize on the recent market conditions. This has led to a slight tightening in Edmonton’s housing market with appreciation in average house prices expected for the last half of 2009.


Vancouver’s real estate market stabilized in the second quarter of 2009 following a price correction that started last fall moving towards a balance between supply and demand. Properties priced at, or below, market value are generating multiple offers from buyers. Average house prices throughout the last half of the year are expected to inch upwards, but increases will likely be in the low single digits.

Royal LePage’s quarterly House Price Survey shows the annual change of prices for key housing segments in select national markets. View the chart here »

July 8, 2009 in Canadian Market Forecast | Permalink | Comments (1) | TrackBack

And the survey says ...

Two in Three (65%) Say It’s a Buyer’s Market Right Now

Opportunity awaits as two in three (65%) Canadians believe the current real-estate market in Canada is a buyer's market, according to the 16th Annual RBC/Ipsos Reid Housing Poll. Nearly three in ten (27%) say they're 'likely' (9% very/18% somewhat) to purchase a home within the next two years', up 4 points from last year and the largest single-year increase since 2001. But Canadians are split on whether buying conditions will change to be more favourable within the next year, such that it makes more sense to wait until next year (52%) or buy now (48%).

Albertans (35%) are most likely to say they'll buy a home within the next two years, followed by those living in Ontario (30%), British Columbia (26%), Saskatchewan and Manitoba (25%), Atlantic Canada (25%), and Quebec (22%).

British Columbians (78%) are the most likely to believe that it's a buyer's market right now, followed by those living in Ontario (73%), Alberta (72%), Atlantic Canada (58%) and Quebec (52%). Only one in three (34%) in Saskatchewan and Manitoba believe the same.

The increase in home-buying intentions appears to be led by the under 35 segment of the population, as 48% say they're 'likely' (18% very/29% somewhat) to purchase a home in the next two years, up 12 points from last year. Renters also see an opportunity to enter the real-estate market, as four in ten (38%) say they're 'likely' (11% very/26% somewhat) to purchase in the next two years.

Overall, most (83%) Canadians are still convinced that buying a house or condominium is a 'good' (34% very/48% somewhat) investment. While this proportion is down 3 points from last year and 8 points from its high of two years ago, it is still well above its low (72%) of 1999.

Among those individuals who intend to buy a home within the next two years, three in ten (28%) say that favourable housing prices are among their reasons for purchasing. A majority (54%) of Canadians believe that housing prices will continue to drop next year (up from 23% last year), compared to 25% who think they will be higher (down from 56%), or 21% who believe that prices will be the same at this time next year (unchanged).

One in ten (14%) homeowners believe their home has lost value within the last two years, but a majority (54%) of these individuals believe the value of their home will recover within 3-5 years, while others believe it will be a shorter time-frame (30%), longer (11%), or never (6%).

Among those individuals who are not intending to purchase a home within the next two years, most (60%) say they've already got a home, but others cite job anxiety (8%) or general concern for current economic conditions (6%) as the reason they're not likely to purchase a home. Three percent (3%) are waiting for prices to stabilize or decrease further.

These are the findings of a poll conducted on behalf of RBC from January 6 to 9, 2009. This online survey of 2,026 Canadian adults was conducted via the Ipsos I-Say Online Panel, Ipsos Reid's national online panel. The results of these polls are based on a sample where quota sampling and weighting are employed to balance demographics and ensure that the sample's composition reflects that of the actual Canadian population according to Census data.

Quota samples with weighting from the Ipsos online panel provide results that are intended to approximate a probability sample. Statistical margins of error are not applicable to online polls, however, an unweighted probability sample of this size, with a 100% response rate, would have an estimated margin of error of +/- 2.2 percentage points, 19 times out of 20, had the entire adult population of Canada been polled.

March 4, 2009 in Canadian Market Forecast | Permalink | Comments (1) | TrackBack


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