“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,” says Re/Max in its housing outlook. “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.”
Phil Soper, president and CEO of Royal LePage, says in the company’s forecast: “The oldest peak millennials are now in their 30s. This huge wave of Canadian consumers has been transforming Canadian real estate for a decade, putting more focus and upward price pressure on our condominium housing stock.”
But that’s now changing, says Soper. “With kids in hand and dog on leash, these parents are now eyeing the suburbs that their baby boomer parents so coveted. We predict that the period of disproportionately higher price appreciation in the condo segment is drawing to a close as interest in detached homes is reborn.”
The Canadian Real Estate Association (CREA) says, “Economic fundamentals underpinning housing activity remain strong outside of the Prairies together with Newfoundland and Labrador. The national resale housing market outlook continues to be supported by population and employment growth while consumer confidence is benefiting from low unemployment rates outside oil-producing provinces. Additionally, the Bank of Canada is widely expected not to raise interest rates in 2020.”
CREA predicts that national home sales will reach 530,000 units in 2019, which is an increase of 8.9 per cent year-over-year. But it cautions, “While sales are expected to trend higher, most of this annual increase in 2020 reflects a weak start to 2019 rather than a significant change in sales trends.”
CREA says the average national price will rise by 6.2 per cent in 2020 to $531,000. Re/Max is predicting a 3.7-per-cent hike in average prices. Royal LePage uses an aggregate price measure that includes both new and resale homes. It’s calling for a 3.2-per-cent price appreciation.
Price trends “across Canada are generally expected to resemble those in 2019, with small declines in Alberta, Saskatchewan and Newfoundland and Labrador, and solid gains in Ontario, Quebec and the Maritimes,” says CREA. “In British Columbia, the average home price is expected to rebound next year following this year’s decline.”
RBC Economics says low interest rates, strong labour markets and rapid population growth will keep the market on an upward trajectory. “Yet, it’s the availability of supply that will ultimately determine how much home resale activity will grow next year. The persistence of low inventories in many markets is poised to maintain the heat on property values, and we expect prices to climb further – especially in Toronto and Vancouver. This suggests housing tensions will re-intensity after a year of slight improvement. No doubt policymakers will be mindful of any such development when considering potential changes to housing policy.”
Many in the real estate industry have called on the government to make changes to the stress test rules, particularly since the same rules apply everywhere, regardless of whether the market is hot or cold. Although the stress test had the desired impact of cooling overheated markets in Ontario and B.C., it made affordability an even bigger issue in places like Alberta, Saskatchewan and the Atlantic Provinces. However, the Re/Max survey found that only two in 10 respondents said the stress test has negatively impacted their ability to purchase a home.
A new government program, the First-Time Homebuyer Incentive, is not expected to be a major factor in many markets, but in Montreal it could have an impact, says Dominic St-Pierre, vice-president and general manager of Royal LePage’s Quebec region. “Incentives to increase access to property are very useful for first-time home buyers when it comes the time to purchase, but they also create more demand,” he says. “It is important that the government policy take into account measures that will offset imbalance between demand and supply to provide current and future generations with a better chance to own a home. The goal should be housing inventory that answers the needs of our growing population.”
In November 2019, CREA says rising sales combined with fewer new listings led to the lowest national inventory since mid-2007.
In the Greater Toronto Area, “Inventory is critically low and it is possible that we could see a return to accelerating high price appreciation in the near term without new supply becoming available,” says Kevin Somers, COO of Royal LePage Real Estate Services Limited.
For investors, the multi-suite residential property market will remain in a bullish phase this year, says a report by Morguard. “Rental demand fundamentals will continue to impress,” says the report, including economic and employment growth, demographic trends and Canada’s strong draw for international migrants and students.
“Demand will surpass supply, despite an uptick in construction activity. New units will be absorbed at a healthy pace and have little impact on market vacancy…The resulting landlord’s market will mean higher rents for prospective tenants and limited choice. The anticipation of further rental growth over the near term will remain an attraction for various investor groups,” says Morguard.
