Realtors now believe property prices in Canada will rise 5.7% in 2014, the second time this year that estimates have been upped, thanks to limited listing, a late-developing market and delayed interest rate rises
For the second time in a row Canada’s real estate have upped their predictions on price rises – this time they believe the market will rise 5.7% in 2014.
The national average home price is now projected to reach CAN$404,300 compared to March’s forecast of a 3.8% increase to CAN$397,000, which was itself a 1.3% rise on the estimates at the start of 2014, according to the Canadian Real Estate Association (CREA).
The national average price is forecast to edge up a further 0.7 per cent in 2015 to $407,300, but this is slightly down on the 1.1% previously predicted. Alberta and Manitoba are forecast to lead the way with rises of 2% in 2015, followed by Ontario at 1.2%.
British Columbia, Alberta, and Ontario real estate values are all expected to grow by around 5.7% this year with lower gains in other provinces this year.
Sales are forecast to reach 463,400 units in 2014, up 1.2% on 2013 and just 300 down on the March estimates. This is in line with the 10‐year average.
The optimism follows one of the coldest winters on record and limited listings in the early months of the year, but CREA warns that the resulting sales momentum may be limited.
“Extraordinarily bleak winter weather made for a slow start to 2014 national sales activity. As the first quarter ended, sales momentum heading into spring was constrained by a continuing shortage of listings in a number of local markets. The rise in newly listed properties in April and May supported an increase in sales activity.
“The deferral of sales and listings reflects a delayed start to the spring home buying season, with combined sales for the period from March to May coming in largely as anticipated and at average levels. These deferrals are now likely to have been largely depleted, which suggests that the strength of sales momentum heading into the summer may be transient.”
Another major factor is that interest rates, which were expected to start to edge higher in early summer, may not take place until closer to the end of the year, which helps home ownership affordability for those who need finance.
British Columbia is forecast to see the largest annual increase in sales at 8.3%, with Alberta at 3.8% and activity in Saskatchewan, Manitoba, and Ontario roughly in line with 2013. Sales in 2014 are forecast to fall by 5.1% in Nova Scotia, 4.2% in New Brunswick, 2.6% in Newfoundland and Labrador and 1.7% in Quebec.
In 2015, the outlook for the economy, jobs and incomes is one of further improvement, accompanied by a slow and gradual increase in fixed and variable mortgage interest rates.
“On balance, these two opposing factors should most benefit housing markets where sales are currently softer, but prices remain more affordable. Sales in relatively less affordable housing markets are likely to be more sensitive to higher fixed mortgage rates,” the report states.
“As such, provinces east of Ontario are expected to post the largest gains in activity in 2015 in the range of around 2.5 to five per cent, while sales in provinces from British Columbia to Ontario are forecast to remain little changed.”
National activity is now forecast to reach 467,800 units in 2015, representing a further annual increase of 0.9%. This would result in sales staying in line with the 10‐year average for the eighth year in a row.
“Average prices have remained firm and continue to reflect a rise in the share of national sales among some of Canada’s most active and expensive markets compared to last year. Additionally, prices have been heating up in some markets, particularly in Calgary and Toronto where single family properties remain in short supply.”
The forecast is made via the Multiple Listing Service data from of Canadian real estate boards and associations for 2014 and 2015.
* Separate CREA figures show actual (not seasonally adjusted) average prices for homes sold in May 2014 was CAN$416,584, up 7.1% year-on-year.
The biggest annual price growth came in Calgary (10.12%), Greater Toronto (7.08%), and Greater Vancouver (4.27%).
“The national average price continues to be skewed upward by sales activity in Greater Vancouver and Greater Toronto, which are among Canada’s largest and most expensive housing markets. Excluding these two markets from the calculation, the average price reaches a relatively more modest CAN$336,373 while the year-over-year increase shrinks to 5.3 per cent,” CREA says.
The number of home sales processed through the MLS system rose 5.9% from April to May 2014 – the largest month-on-month increase for almost four years.
CREA President, Beth Crosbie, says, “The monthly increase in May activity was widespread among local housing markets, with some eighty per cent of them reporting stronger sales compared to April,” said “Over the past 25 years, that widespread a monthly sales increase has been recorded only a handful of times.”
Around 60 of local markets, led by Greater Vancouver, Fraser Valley, Calgary, and Greater Toronto, saw annual rises in May sales. Montreal and Halifax-Dartmouth had lower sales.
“The national trend for new listings has mirrored the trend for sales in recent months. The number of newly listed homes rose 3.8 per cent in May, marking a fourth straight monthly gain. Also in line with sales activity, new listings were up in about 80 per cent of local markets.
Gregory Klump, CREA’s Chief Economist, says, “In markets where supply had become tight, we expected sales to improve in tandem with listings. Had it not been for such a brutal winter that delayed the launch of the spring market, the improvement in new listings and sales would likely have been more spread out over the past few months.”