Canadian homebuyers remain undaunted in 2013, as housing sales and average price approach five-year high
Major residential real estate markets poised for further growth in 2014
Canadian consumers remained remarkably steadfast in their determination to achieve homeownership in 2013, fuelling residential real estate sales and average price nationally to a five-year high, despite a spotty regional performance. Improved economic performance on both a national and global stage, combined with historically low interest rates and rising consumer confidence, should spark greater strength in 2014, with housing sales and values expected to further appreciate, according to a report released today by RE/MAX.
The RE/MAX Canadian Housing Market Outlook 2014 examined trends and developments in 25 major markets across the country. The report found that the number of homes sold is expected to match or exceed 2012 levels in almost two-thirds of markets (15/25) in 2013, led by strong activity in British Columbia, including Vancouver (up 10 per cent) and Kelowna (10 per cent). Ninety-two per cent (23/25) of markets are set to experience average price increases by year-end 2013, with Hamilton-Burlington the country’s frontrunner at 7.5 per cent, followed by Barrie and District at seven per cent, Calgary and St. John’s at six per cent, and Greater Vancouver, Winnipeg and the Greater Toronto Area at five per cent. The forecast for 2014 shows the upward trend gaining momentum, with values expected to climb yet again in 92 per cent (23/25) of centres, led by Greater Toronto at six per cent. Strength and stability are forecast to characterize Canadian real estate in 2014, with sales estimates on par or above year-ago levels in all markets examined, led by Kelowna (10 per cent) and Calgary (nine per cent).
Nationally, an estimated 466,000 homes will change hands in 2013, an increase of three per cent over the 453,372 sales recorded in 2012. Canadian home sales are expected to climb two per cent to 475,000 units by year-end 2014. The average price of a Canadian home is forecast to appreciate four per cent to $380,000 in 2013, up from $363,740 in 2012. Values are expected to continue to escalate in 2014, rising three per cent to $390,000 by year end.
“It was quite a turnaround in Canadian real estate markets after a softer start to the year,” says Elton Ash, Regional Executive Vice President, RE/MAX of Western Canada. “Following an initial period of adjustment, first-time buyers pushed forward with delayed intentions, stimulating activity at all price points. With renewed momentum and enthusiasm in place, resale housing is once again poised for growth in 2014.”
Regional disparities surfaced early in 2013, according to the RE/MAX Report, and were evident throughout the year. Alberta started the year with a bang, with both major markets bucking the national downward trending in sales. Homebuying activity in British Columbia, Saskatchewan, Manitoba, and Ontario kicked into high gear in July, with most centres expected to move ahead of 2012 levels by year end, led by Greater Vancouver, Kelowna, Victoria (six per cent), Windsor-Essex (six per cent), Edmonton (five per cent) and Hamilton-Burlington (five percent). Yet, performance in Quebec and Atlantic Canada is forecast to fall short of 2012 levels. More consistent performance is expected in 2014, especially given economic projections for the East Coast and Quebec. Both regions should rebound in the new year, led by Halifax-Dartmouth (five per cent), Moncton (three per cent), Greater Montreal (two per cent) and Quebec City (two per cent).
“Inventory was vital in maintaining market stability in 2013,” says Gurinder Sandhu, Executive Vice President, Regional Director, RE/MAX of Western Canada. “A run-up in inventory at the outset of the year, amid weaker demand, could have changed the outcome to what ended up being another relatively healthy year of real estate activity. Instead, we saw modest price growth and rising sales levels, particularly in the second half. Another positive performance is projected for 2014, with average price forecast to break records in many markets.”
Although there are several factors that are expected to contribute to rising housing values on a national basis, one of the most pressing is build out. Nowhere is that more obvious than in Vancouver, where the mountains and the ocean have prevented further growth, and the Greater Toronto Area, where the greenbelt has stymied future development. As such, the availability of low-rise homes relative to the population is expected to contract, placing further pressure on prices. Vertical growth and its affordable price point is representative of the future.
“We’re definitely seeing a greater commitment to higher density at a municipal level,” says Ash. “In fact, the trend already underway in Vancouver and Toronto, has gained serious momentum in smaller markets where cities are moving to infuse vibrancy into the urban core through mixed-use residential/commercial/retail development. The level of investment is substantial—dovetailing with revitalization efforts currently underway.”
Solid underpinnings continue to support healthy levels of real estate activity from coast to coast. Buyers appear to be realistic in their pursuits, and after several rounds of mortgage tightening, many are coming to the table better qualified, with larger downpayments and readjusted expectations. Imposed restrictions have had the desired effect. A sound framework is now in place to support steady and sustainable growth over the next several years. Existing inventory levels remain crucial to Canadian housing markets moving forward. The tightening currently demonstrated at entry-level price points—as more first-time buyers make their way back into the market—could translate into further price hikes down the road.
“Canadian homebuyers remain savvy, with a long-term mindset that bodes well for stability,” says Sylvain Dansereau, Executive Vice President, RE/MAX Quebec. “Yet, they also value progress, and we expect that to translate again in 2014. Equity gains should continue to result in tangible leaps to larger homes or better neighbourhoods, as well as a growing wave of renovation and revitalization. Stock market performance is also expected to bolster homebuying activity, as paper wealth is converted to material wealth.”
View the full report here.