With the close of the first quarter of 2017 the Canadian Real Estate Association is making some adjustments to its outlook for the rest of the year and beyond.
Regional Variation for Sales and Prices
CREA expects to see national MLS sales activity drop by 3% this year, to a little less than 519,000 units. The Association points out there is a high degree of regional variation. British Columbia is forecast to see a 17.5% drop in sales. Prince Edward Island – which, like B.C., is coming off all-time highs set in 2016 – is looking at a drop of nearly 11%. Ontario, on the other hand, is expected to show a meager 1% increase. Demand remains high throughout the Golden Horseshoe but supply is very tight.
Alberta is pegged to lead the way in sales for 2017 with an increase of
5%. That is about 10% below the 10 year average, but local real estate boards are encouraged that sales levels are returning to normal.
Little change is forecast in the rest of the country.
The average price of a home is forecast to increase 4.8% to $513,500, again, with a lot of variation across the country. Prices in British Columbia are predicted to fall more than 5%, largely due to the slowdown in the Greater Vancouver area. Newfoundland and Labrador is also expected to decline by more than 5%. A 2.8% dip is forecast in Saskatchewan while Ontario is predicted to see a 15% increase.
Rules, Insurance & Rate Hikes
In the rest of the country price gains are expected to run below the rate of inflation. CREA says changes to federal mortgage rules and default insurance premiums have helped stall increases.
Generally, CREA sees the new regulations, the insurance and impending mortgage rate increases as key detriments to affordability. In particular the Association points to the new, tougher “stress test” for mortgage qualification, saying it could force buyers (especially first-time buyers) to delay, relocate or abandon their purchase.
2018 Look Ahead
Looking ahead to 2018, CREA is calling for a further 1% decrease in sales activity with a 5% increase in price. Both of these number are based on the overbearing influence of Ontario, more precisely, the Greater Toronto-Hamilton Area.
CMHC Still Waving Red Flag
Canada Mortgage and Housing Corporation is waving the red flag over Canada’s housing market for the second quarter in a row. Its latest Housing Market Assessment points to strong evidence of problematic conditions with six of the 15 markets surveyed falling into the red zone.
GTA Getting the Blame
The Greater Toronto-Hamilton Area continues to be the chief culprit with overheating, price acceleration and overvaluation listed as moderate to strong. CMHC says that when Ontario markets are removed from the calculation price growth would have been flat through the survey period.
Vancouver Boom Echoes in Victoria
In British Columbia the HMA suggests Vancouver’s boom may be quieting down, but it may also be echoing in Victoria. Vancouver continues to show strong evidence of problematic conditions. Overvaluation is the key concern. Even though sales have slowed there is still more demand than supply.
Victoria has been bumped up from weak to strong due to concerns about overvaluation. Once again demand is outpacing supply, pushing prices beyond levels that are supported by overall economic conditions. It is suspected that buyers who want to locate in B.C. are turning away from the high prices and taxes in Vancouver and looking to Victoria instead.
Calgary Gets Better
In Calgary fears of overvaluation have eased and the city’s rating has shifted from strong to moderate. Fundamental economic conditions have improved in Alberta and Calgary home prices are falling in line with those fundamentals. Many market watchers take these as further signs that things are returning to balance in Alberta.
The East Holds Steady
In Quebec, both Montreal and Quebec City maintain their moderate rankings, although there are on-going concerns about overvaluation – moderate in Montreal, strong in Quebec City. Small increases in personal income and demographic shifts that appear to be taking younger, first-time buyers out of the marketplace are seen as principal factors here.
Atlantic Canada continues to display weak evidence of problems. Concerns about overbuilding in the region are being addressed by increasing populations, including the influx of Syrian refugees.