RE/MAX Canadian Housing Market Outlook 2014
Major residential real estate markets poised for further growth in 2014
Mississauga, ON (December 11, 2013) – 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 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 (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.
Canadian housing markets are on solid ground after a somewhat harrowing first and second quarter of 2013. Better-than-expected economic performance, relatively stable inventory levels, and the threat of higher interest rates down the road proved mid-year game changers, providing the stimulus necessary to jumpstart homebuying activity. The serious momentum that emerged in the latter half of the year is expected to spill over into 2014, setting the stage for continued growth and expansion in most residential markets.
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 per cent). 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 played a key role in keeping housing markets at an equilibrium in 2013—with supply largely meeting demand throughout the year. The anticipated run-up in inventory failed to materialize in most major centres. Prices remained healthy as a result, with steady upward momentum noted, particularly in the latter half of the year. The trend is forecast to continue, with average price appreciation expected to break existing records in 2014.
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. 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. 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 activity, as paper wealth is converted to material wealth.