Canadian home prices expected to increase by 3.7 per cent
Increased consumer confidence could be a key factor affecting the housing market in 2020
Fifty-one per cent of Canadians are considering a home purchase in the next five years, up from 36 per cent at the same time last year
Only two-in-ten Canadians say that the mortgage stress test negatively affected their ability to purchase a home in 2019
TORONTO and KELOWNA, BC, Nov. 26, 2019 /CNW/ - RE/MAX is expecting a leveling out of the highs and lows that characterized the Canadian housing market in 2019, particularly in Vancouver and Toronto, as we move into 2020. Healthy price increases are expected next year, with the RE/MAX 2020 Housing Market Outlook Report estimating a 3.7 per-cent increase in the average residential sales price.
Most individual markets surveyed across Canada experienced moderate price increases year-over-year from 2018 to 2019. However, some regions in Ontario continue to experience higher-than-normal gains, including London (+10.7 per cent), Windsor (+11 per cent), Ottawa (+11.7 per cent) and Niagara (+12.9 per cent).
"Southern Ontario is witnessing some incredibly strong price appreciation, with many regions still seeing double-digit gains," says Christopher Alexander, Executive Vice President and Regional Director, RE/MAX of Ontario-Atlantic Canada. "Thanks to the region's resilient economy, staggering population growth and relentless development, the 2020 market looks very optimistic."
As more Canadians have adjusted to the mortgage stress test and older Millennials move into their peak earning years, it is anticipated that they will drive the market in 2020, particularly single Millennials and young couples. A recent Leger survey conducted by RE/MAX found that more than half (51 per cent) of Canadians are considering buying a property in the next five years, especially those under the age of 45.
British Columbia Consumer confidence in regions like Vancouver West in early 2019 was extremely low and remained relatively shaky throughout the year, resulting in an average residential sale price drop of 7.5 per cent, from $2,272,922.50 in 2018 to $2,103,234 in 2019. The number of sales declined by seven per cent. However, consumers have acclimatized to regulation adjustments, specifically the mortgage stress test, and consumer confidence has begun to return. This trend is expected to prevail in 2020, with prices expected to rise four per cent. Most markets in the province are experiencing a balanced market.
Interestingly, Fraser Valley also experienced a price drop of almost four per cent year-over-year, from $724,740.50 to $696,502.50. However, the region is also expected to witness substantial growth, particularly in downtown Surrey, due to the high number of real estate developments catering to businesses and educational institutions. First-time buyers are expected to drive the market in 2020 due to the relative affordability of the region compared to Vancouver proper.
"The drop in sales in some key British Columbia markets represents the last of the 'down' market spillover from 2018," says Elton Ash, Regional Executive Vice President, RE/MAX of Western Canada.
"Consumer confidence is poised for a comeback, leading to more healthy and sustainable growth, as more buyers come to terms with the stress test and interest rates are unlikely to increase in any meaningful way in 2020."
Prairies Alberta continues to experience slowing economic conditions, which have contributed to a decrease in average residential sale prices in Calgary, from $478,088 in 2018 to $460,532 in 2019. Condos are the easiest way for first-time homebuyers to get into the market, with starter units going for as low as $150,000. While the city's unemployment rate continues to remain high compared to the rest of Canada, the population is increasing, with more people moving to the city from other parts of the province.
On the other hand, Winnipeg has shown a small increase in average residential sale price, both for freehold and condominium properties, by 1.5 and 0.8 per cent, respectively. The number of sales also increased by five per cent, from 8,139 in 2018 to 8,539 in 2019. Immigration to the city, in combination with reasonable prices and ample supply of inventory, is expected to drive sales going into 2020. Regina also saw the number of sales increase by more than five per cent year-over-year, despite being one of the few markets where the effects of the mortgage stress test are still being felt. The Prairies are seeing a mix of buyer's and balanced markets.
Ontario Toronto is set to experience a strong housing market in 2020. Lower unemployment rates, economic growth, and improved overall affordability in the Greater Toronto Area are expected to drive the market forward. The estimated average sale price increase for 2020 is six per cent, two points higher than the growth experienced between 2018 ($835,422) and 2019 ($880,841). The city saw 76,413 transactions in 2019, up 12 per cent from last year (68,064). While Toronto is experiencing its "busiest" construction season ever, housing supply still falls short of the demands of the city's rapidly growing population.
Cities such as Ottawa and Windsor are seller's markets, showing substantial increases in average residential sale price at 11.7 and 11 per cent, respectively. This strong growth is expected to continue into 2020, with Ottawa's new LRT system impacting surrounding development and Windsor's continued affordability attracting young professionals to the area. Buyers are also not burdened by the mortgage stress test, as they were in 2018.
The Niagara region is also showing strong growth, with average residential sale price increasing almost 13 per cent, from $378,517 in 2018 to $427,487.50 in 2019. Value-conscious consumers from the Greater Toronto Area are buying in droves, with many choosing to live in the region while commuting to Toronto. Seller's markets dominate the province.
Atlantic Canada In Atlantic Canada, Halifax and Saint John have experienced solid price appreciation of six and five per cent, respectively. Affordability continues to attract many buyers in the region, most of whom are buying single-detached homes. At the same time, the region's condominium market is being driven by retirees. Conversely, the market in St. John's is expected to recover in 2020, with increased consumer confidence expected to bring about stabilization. However, the city's aging population and high rate of outbound migration is expected to have an impact on housing market activity at some point. Most markets in the region are witnessing balanced markets.
The RE/MAX 2020 average residential sale price expectation for Canada is an increase of 3.7 per cent.
For the full 2020 RE/MAX Housing Market Outlook report, click here.
Average Residential Sale Price*
$324,857 for freeholds; $242,383 for condos
$330,010 for freeholds; $244,383 for condos
+1.5% for freeholds; +0.80% for condos
*Average residential sale prices listed are from January 1 to October 31 in 2019
** Average residential sale prices listed are for the full year in 2018
*** Estimated percentage increase/decrease for 2020 in comparison to previous year
Key Findings from the 2020 RE/MAX Housing Market Outlook Omnibus Survey
Fifty-one per cent of Canadians are considering buying a property in the next five years. This is up from 36 per cent at the same time last year. The increase is attributed to consumers' adjustment to the mortgage stress test and increased purchasing power. Only two-in-10 survey respondents said the mortgage stress test has negatively impacted their ability to purchase a home.
Liveability continues to be important to Canadians, with more than half wanting to live closer to green spaces and shopping/dining locations. Specific figures:
62 per cent of Canadians would like to live near shopping/dining locations
59 per cent would like to live closer to green spaces
36 per cent would like to live closer to public transit
30 per cent would like to live closer to work
ABOUT THE 2020 RE/MAX HOUSING MARKET OUTLOOK REPORT The 2020 RE/MAX Housing Market Outlook Report includes data from local boards and RE/MAX brokerages. RE/MAX brokers and agents are surveyed on trends, local development and features.
About Leger Leger is the largest Canadian-owned full-service market research firm. An online survey of 2003 Canadians (excluding Quebecers) was completed between February 4-10, 2019, using Leger's online panel. LegerWeb. Leger's online panel has approximately 400,000 members nationally and has a retention rate of 90%. A probability sample of the same size would yield a margin of error of +/- 2.2%, 19 times out of 20. Millennials are defined as Canadians aged 18 to 34 years of age.
About the RE/MAX Network RE/MAX was founded in 1973 by Dave and Gail Liniger, with an innovative, entrepreneurial culture affording its agents and franchisees the flexibility to operate their businesses with great independence. Over 125,000 agents provide RE/MAX a global reach of more than 110 countries and territories. RE/MAX is Canada's leading real estate organization with more than 20,000 Sales Associates and over 900 independently-owned and operated offices nationwide. RE/MAX, LLC, one of the world's leading franchisors of real estate brokerage services, is a subsidiary of RE/MAX Holdings, Inc. (NYSE: RMAX). With a passion for the communities in which its agents live and work, RE/MAX is proud to have raised millions of dollars for Children's Miracle Network Hospitals® and other charities. For more information about RE/MAX, to search home listings or find an agent in your community, please visit www.remax.ca.
Forward looking statements This report includes "forward-looking statements" within the meaning of the "safe harbor" provisions of the United States Private Securities Litigation Reform Act of 1995. Forward-looking statements may be identified by the use of words such as "believe," "intend," "expect," "estimate," "plan," "outlook," "project" and other similar words and expressions that predict or indicate future events or trends that are not statements of historical matters. These forward-looking statements include statements regarding housing market conditions and the Company's results of operations, performance and growth. Forward-looking statements should not be read as guarantees of future performance or results. Forward-looking statements are based on information available at the time those statements are made and/or management's good faith belief as of that time with respect to future events and are subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in or suggested by the forward-looking statements. Such risks and uncertainties include, without limitation, (1) changes in business and economic activity in general, (2) changes in the real estate market, including changes due to interest rates and availability of financing, (3) the Company's ability to attract and retain quality franchisees, (4) the Company's franchisees' ability to recruit and retain real estate agents and mortgage loan originators, (5) changes in laws and regulations that may affect the Company's business or the real estate market, (6) failure to maintain, protect and enhance the RE/MAX and Motto Mortgage brands, (7) fluctuations in foreign currency exchange rates, as well as those risks and uncertainties described in the sections entitled "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the most recent Annual Report on Form 10-K filed with the Securities and Exchange Commission ("SEC") and similar disclosures in subsequent SEC filings. Readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date on which they are made. Except as required by law, the Company does not intend, and undertakes no duty, to update this information to reflect future events or circumstances.