CANADIAN HOME PRICES EXPECTED TO INCREASE BY 1.7 PER CENT IN 2019
Modest price increases are expected in 2019, as the RE/MAX 2019 Housing Market Outlook estimates the average sales price to increase by 1.7 per cent. Housing markets across the country have stabilized in 2018, after the unprecedented increases in average sales price that many markets experienced in 2017. However, there continue to be some outliers in 2018 average sales price gains, particularly in areas outside of the main city centres, such as Chilliwack (+ 13%), Windsor (+13%), London (+17%) and Charlottetown (+11%).
It is anticipated that the market will continue to stabilize, as Canadians will start to feel the pinch of higher interest rates as they move forward with their home-buying plans in 2019. A recent survey revealed almost one-third (31 per cent) of Canadians said higher interest rates have not affected their ability to get an affordable mortgage thus far. However, this is expected to change in 2019. A separate survey of RE/MAX brokers and agents found 83 per cent predict rising interest rates will make it more difficult for Canadians to purchase a home next year.
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Reduced foreign buyer activity has opened up more opportunity for local buyers in Greater Vancouver’s condo market. While average residential sale prices for all properties increased by two per cent, from $1,030,829 in 2017 to $1,049,362 in 2018, the number of sales dropped by 30 per cent. The low absorption rate is expected to bring down average residential sale prices in 2019 by three per cent
Similarly, the number of sales year-over-year has dropped by 33 per cent in Kelowna. Rising interest rates, government policy changes and the mortgage stress test were all factors that contributed to the decline, which is expected to continue into 2019. Average residential sale prices increased by six per cent year-over-year from $674,930 in 2017 to $718,915 in 2018, with prices expected to decrease by three per cent in 2019.
The drop in sales in key markets across British Columbia can be partially attributed to Canadians’ increasing difficulty in getting an affordable mortgage in the region,” says Elton Ash, Regional Executive Vice President, RE/MAX of Western Canada. “The situation created by the introduction of the mortgage stress test this year, as well as continually increasing interest rates, means more Canadians will be priced out of the market.
Slowing economic conditions in Alberta have contributed to a decrease in average residential sale prices in Edmonton, from $393,003 in 2017 to $379,539 in 2018. While economic recovery is expected to take some time, the luxury market is thriving, with prospective investors in cannabis and migrant speculators driving this new segment. Meanwhile in Calgary, the market is expected to stay relatively flat in 2019 due to its reliance on the oil and gas industry, and further real estate hindrances like the mortgage stress test.
Conversely, Winnipeg has shown a moderate increase of average residential sale price, rising from $315,720 in 2017 to $323,001 in 2018. Looking ahead to 2019, prices are expected to continue on this upward trajectory, with an expected increase of four per cent. Although the senior population is downsizing, immigration to Winnipeg from urban centres such as Toronto and Vancouver (15,000 people move to Manitoba every year) is expected to drive sales going into 2019. In Saskatchewan, both Regina and Saskatoon have experienced a buyers’ market which is set to prevail into 2019.
In Toronto, rising interest rates and the mortgage stress test were the two major factors affecting market activity this past year, with average sale prices dropping by four per cent from $822,572 in 2017 to $789,181 in 2018, and unit sales down by 16 per cent. Lack of affordability in the single-detached segment will make it difficult for buyers wanting to enter the freehold market. The resale condo market, on the other hand, now represents almost 37 per cent of total residential sales, with its relative affordability fueling the rise of vertical growth. Average residential sale price is expected to increase by two per cent in 2019.
Communities such as Ottawa and London are sellers’ markets, showing increased growth in average residential sale price. This trend is expected to continue into 2019, however rising interest rates and the stress test continue to make it difficult for prospective buyers in other Ontario communities, including Barrie, Oakville and Durham regions.
Due to the stress test and increasing interest rates, we are seeing more buyers in traditionally affordable regions in Ontario unable to enter the market,” says Christopher Alexander, Executive Vice President and Regional Director, RE/MAX of Ontario-Atlantic Canada. “This is particularly true for first-time buyers and single Millennials, as evident in cities like Brampton, Kingston and Durham.
In Atlantic Canada, Halifax, Saint John and St. John’s have all experienced stable price appreciation in 2018. Detached homes continue to be the most in-demand property type, while the region’s aging population and retirees are driving the condominium market. The economic slowdown and drop in oil prices in St. John’s have resulted in a buyer’s market, but activity is expected to pick back up in the latter half of 2019.
The RE/MAX 2019 average residential sale price expectation for Canada is an increase of 1.7 per cent.
Key Findings from the RE/MAX 2019 Canadian Housing Market Outlook Omnibus Survey
Thirty-six per cent of Canadians are considering buying a property in the next five years. This is down from 48 per cent at the same time last year. The decrease is attributed to actual and perceived impacts of the mortgage stress test and rising interest rates on housing affordability. Thirty-one per cent of survey respondents said higher interest rates have not affected their ability to get an affordable mortgage so far, but the risk of future rate hikes, as indicated by RE/MAX brokers and agents, might affect these buyers in 2019.
Liveability continues to be important to Canadians, with more than half wanting to live closer to green spaces, work and better access to public amenities. Despite the apparent popularity of recreational cannabis since legalization in October 2018, 65 per cent of respondents said they do not want to live near a retail cannabis store. Specific figures:
- 52 per cent of Canadians would like to live closer to green spaces
- 47 per cent would like better access to public amenities
- 35 per cent would like to live closer to work
- 37 per cent would like to live closer to public transit
- 35 per cent would like to move to a different neighbourhood
- 59 per cent strongly disagree with living near a retail cannabis store
Victoria’s housing market is a buyer’s market due to higher inventory levels. The mortgage stress test and higher interest rates were key factors driving market activity, and this is expected to continue in 2019. The condo market had the most notable gains in 2018 and sales are expected to hold strong next year. A shift to a balanced market is predicted for 2019, as some buyers are taking a wait and see approach due to regulatory and tax changes continuing to affect the real estate landscape in Victoria.
Greater Vancouver continues to see strong activity in the townhome and condominium markets. With quieter foreign buyer activity this year, local buyers were able to tap into the condo market, and prices continue to decrease and become more affordable for locals. While the economy in Greater Vancouver is good, rising interest rates are expected to affect sales in 2019, as well as the empty home tax that was introduced by the City of Vancouver.
Kelowna is a balanced market with six months of inventory available. Activity in 2018 was driven by young couples in the freehold market, and retirees/downsizers in the condo market. Economic factors affecting Kelowna’s housing market this year include rising interest rates, government policy changes regarding tax and the mortgage stress test. These factors are expected to continue into 2019.
Chilliwack has shifted from a seller’s market in 2017 to a buyers market in 2018 due to an increase in supply with low to moderate demand. There are currently 6.5 months of inventory on the market which is expected to be slightly higher at 9 months in 2019. The luxury market is expected to remain stable with the typical price point for a luxury home beginning at $1,000,000.
Edmonton may experience a decline of sales moving into 2019 as Alberta’s economy continues to recover. The federal government’s litmus test, higher interest rates and unemployment rates have led to a slow market overall in 2018 and is expected to continue into 2019. Conversely, the newly built luxury market is thriving with cannabis investors and migrant speculators purchasing homes, this may continue to drive the luxury home market in 2019. The upcoming May 2019 provincial election will be watch closely and, given the outcome, may help to shift the outlook for 2020 and beyond to a more positive one.
Calgary’s market remains flat due to its reliance on the oil and gas industry along with the mortgage stress test and slow economy. This is likely to continue into 2019 and market trends will be determined by what happens with the proposed pipeline along with the ongoing fluctuations in oil prices. The market is driven by first-time home buyers and move-up buyers. Older shopping centres turning into mixed use developments, retail turning into specialty units and new condo builds are helping to increase supply in the commercial sector.
Saskatoon has experienced a buyer’s market in 2018, with one-story detached homes seeing the most activity. Economic factors continue to affect the market, such as rising interest rates, the job market, the oil and gas industry and the mortgage stress test. The condo market in Saskatoon is strong, with Millennial buyers and students primarily driving the market.
The housing market in Regina is a buyer’s market, which is expected to continue into 2019. High interest rates and the mortgage stress rest has made buyers more cautious about home ownership. Activity in the luxury market was stable in 2018, with demand for properties $750,000 plus which will prevail into 2019. First-time home buyers and move up buyers will continue to drive the market in 2019.
Winnipeg has shifted from a sellers market in 2017 to a balanced market in 2018. Foreign buyers continue to be active in the region and that is expected to continue into 2019. As the senior population looks to downsize, there is a limited supply of care homes available and demand continues to grow into 2019 which will leave many seniors in the lurch when it comes to housing options. Winnipeg is expected to grow to one million residents by 2035.
Windsor is a seller’s market, which is likely to continue into 2019 due to the region’s strong economy and low unemployment rates. Many buyers from Vancouver and Toronto are looking at Windsor as a good investment opportunity due to its affordability and liveability. Retirees and first-time homebuyers continue to drive demand in the region.
London is experiencing a seller’s market, largely driven by demand for homes priced under $400,000. This trend is expected to continue into 2019. Move-up buyers are impacted by lack of inventory, which is likely to continue next year. A low unemployment rate has boosted confidence again, prompting buyers to return to the region.
Sudbury’s seller’s market in 2018 was a result of low inventory levels. The stress test did not impact the region as much as other areas in the province, due to the region’s affordability. Sudbury is seeing more demand for condos this year, especially from retirees, and builders who have responded by developing townhome-style condos, which are gaining popularity. One-story detached homes are most popular in Sudbury, and are expected to remain in demand in 2019 due to their affordability.
An increase in immigration, rising interest rates and the Canadian dollar has had the biggest impact on the market in 2018. This trend is expected to continue into 2019. Investor activity in the region has slowed dramatically as the prices have capped out and the return on investment has diminished. Investors are now looking towards London and the outskirts of Kitchener-Waterloo. The market has seen a trend with first-time homebuyers who are partnering with friends or siblings to purchase their first property as prices continue to climb and the desire to own a home remains strong.
Hamilton-Bulington’s market was categorized by affordability in 2018. With the stress test introduced this year, move-up buyers were eliminated, and the region experienced a decrease in sales in the $800,000 to $1-million prince range. The condo and luxury markets continue to be driven by retirees. Many retirees missed the hot market in 2017 and chose to downsize in 2018. This trend is expected to continue in 2019.
The hospitality and tourism industry will play a significant role in Niagara’s housing market in 2019, as out-of-town buyers look to Niagara for recreational properties, instead of a cottage in northern parts of Ontario. Detached homes are popular among young buyers in Niagara, while the condo market is primarily driven by retirees and out-of-town buyers. Growing trends include, two families buying a single home together and younger families moving in with their parents. Niagara is currently in a balanced market with 3.5 months of supply; the market is expected to remain balanced in 2019.
Barrie has experienced a balanced market in 2018. Move-up buyers from the Greater Toronto Area are likely to drive the market in 2019 due to the area’s affordability compared to Toronto. Rising interest rates and the mortgage stress test did not affect some buyers’ ability to purchase a home in the past year. A change to local legislation has made it easier for owners to rent out basement apartments, as a way to supplement their income and offset their mortgage payments.
Cornwall experienced a seller’s market in 2018, with activity primarily driven by young families. Lower starting prices for Cornwall’s luxury property segment, and the region’s proximity to Montreal and Ottawa, have attracted buyers from larger metropolitan cities. This trend is expected to continue in 2019. Inventory levels are projected to increase due to rising mortgage rates and their impact on homebuyers’ qualification. Condo activity is expected to slow down, due to lower inventory levels and lack of new construction in the region.
Thunder Bay’s residential sales continue to remain brisk with very little change year-over-year in average prices. Young families and young couples continue to drive overall demand. The condo market is thriving, which is expected to continue in 2019, with retirees looking to downsize and young executives relocating for work in the medical and educational sectors.
Like 2017, this year saw move-up buyers as the key drivers in North Bay’s freehold market. This trend is expected to continue in 2019, as properties in North Bay remain affordable. Recreational properties along the waterfront continue to drive luxury pricing and sales in the region. North Bay experienced a dramatic drop in condo sales, and inventory levels are expected to remain high in 2019. Average sale price was down three per cent due to rising interest rates.
Oakville transitioned from a seller’s market in 2017 to a balanced market in 2018, a correction triggered by the mortgage stress test. The effects of the stress test continued to impact the region through the first half of 2018, and then began to even out in the latter half of the year. The balanced market is expected to prevail in 2019. Oakville’s luxury market, which is driven by move-up buyers, continues to thrive and is expected to continue in 2019 due to the high liveability of the region, and some buyers moving away from urban city centres like Toronto.
Mississauga is seeing a balanced market with some listings taking longer to sell or selling lower than list price. These conditions are expected to prevail into 2019. Mississauga’s luxury market is currently seeing an increase in activity, with new builds and newly renovated homes selling at a fast pace. Growing trends include Millennial’s being priced out of the freehold market.
Brampton’s housing market was primarily driven by young couples and new immigrants in 2018, with many coming from other parts of the GTA, drawn by the region’s affordability and proximity to major highways. The future growth of health care jobs will attract professionals who want to live where they work. The condo market is expected to stay strong in 2019, especially with new builds ready for occupation. Property investors are active in Brampton, with basement apartments and detached homes seeing the most activity. The stress test significantly slowed down home sales in 2018, especially with single Millennial’s who once drove the Brampton market. This is expected to continue in 2019.
Durham has experienced a balanced market in 2018. Affordability in the region means that young couples and families will likely continue to drive the market in 2019. The mortgage stress test did affects some buyers’ ability to purchase a home in the past year. The region is relatively stable in price and inventory. The recent news of the General Motors closure in Oshawa is expected to have a minimal impact on the housing market as the region continues to diversify in education and transportation.
Rising interest rates and the mortgage stress test were major factors affecting market activity in Toronto. Overall sales were down 16 per cent and the single-detached home market fell short. Condominium and townhome sales are strong in Toronto, and there’s now less of a price difference between freeholds and townhomes. The sale of homes priced below $1 million is expected to remain strong in 2019, while homes priced over $1.5 million will be weaker overall.
Kingston has been a seller’s market throughout 2018 but is expected to shift towards balanced territory in 2019 due to a build up of inventory. High interest rates will continue to impact the market. Overall, condos and one-story detached homes are the most sought-after property types, a trend that should remain consistent in 2019. Kingston’s luxury market will continue to experience another record year, particularly in the Thousand Islands region.
This year, Ottawa’s seller’s market was dominated by young families and couples. First-time buyers are expected to dominate the market in 2019. Rising interest rates and the stress test were significant factors to Ottawa’s housing market, and this is expected to continue in 2019. The current three months of inventory is expected to remain stable going into the new year. In the luxury segment, an emerging trend is buying the property for the land and tearing down to make way for a new build.
Saint John is currently in a seller’s market, moving closer to a balanced market with just below eight months of inventory. The market is primarily driven by downsizers purchasing one-story detached homes. Investment properties are in demand for rental income. The recreational market suffered a slowdown in 2018 due to a spring flood, but activity is expected to pick up in the new year.
Halifax is currently experiencing a slight seller’s market due to low inventory levels and shorter days on the market. Despite mortgage changes in early 2018, Halifax saw strong results in both unit sales and prices, but due to multiple interest rate increases, the market has slowed slightly in the latter part of the year. Activity driven by first-time buyers and foreign buyers is expected to remain strong in 2019. Newly built condominiums are likely to remain in demand going into the new year, as units continue to be absorbed.
Charlottetown experienced a seller’s market in 2018. Changes to the Provincial Nominee Program have impacted the market and foreign buyers are not as prominent as they have been in recent years. While the mortgage stress test affected first-time buyers in 2018, they benefitted from a government grant toward their down payment. The investment market is also experiencing increased activity due to the growing student population.
St. John’s is currently experiencing a buyer’s market due to an economic slowdown and drop in oil prices in recent years. However, market conditions are improving, and it is estimated that St. John’s could begin to see an upswing in the latter half of 2019 and into 2020. Economic uncertainty is fading for first-time homebuyers, prompting them to make purchases and jump back into the housing market.