Canada’s largest real estate markets are “catching their breath” from the frantic price rises seen over the past few years – but those crazy days could easily return, according to a report issued October 16 by real estate brokerage Royal LePage.
A combination of a strong economy and the new US-Canada-Mexico trade agreement could increase housing demand across the country over the next couple of years. If this is combined with a lack of focus on housing supply issues, prompted by the current softer market, this could result in another overheating of the country’s major housing markets, according to the report.
“Positive economic fundamentals, supported by a new agreement on trade, should bolster consumer confidence across Canada and stoke demand in the nation’s real estate market,” said Phil Soper, president and CEO, Royal LePage.
“I am concerned that the slower market will cause housing supply issues to be shuffled aside for other priorities. The return of runaway home prices in the country’s largest markets remains a real threat. Not this year, but in the near future. Job growth is strong, Canada is attracting more of the best and brightest from around the world and the large millennial cohort is putting increasing pressure on our limited new housing stock. It is imperative that all levels of government address looming supply shortages, particularly in affordable housing.”
Royal LePage examined home sales and price growth in markets across the country in 2018’s third quarter. In Greater Vancouver it found that the aggregate home rose 3.9 per cent in the third quarter to $1,270,675, compared with the same period last year. However, when looking a different home types, the median price of a condominium increased 9.5 per cent year-over-year to $683,000, whereas, the median price of a two-storey home and bungalow rose 3.5 per cent and 0.9 year-over-year to $1,579,141 and $1,431,172, respectively.
Soper added, “Dangerously overheated regions have cooled considerably this year, while home prices have remained remarkably resilient. This is the soft landing that policy makers were hoping for.”
Royal LePage expects home prices to trend slightly upwards again to the end of this year. By the end of the fourth quarter, Royal LePage expects the aggregate price of a home in Greater Vancouver will rise 1.5 per cent to $1,289,938. The brokerage anticipates a similar percentage price rise across the whole of Canada in this quarter.
The brokerage’s predictions jive with the B.C. Real Estate Association’s bullish position that B.C. home sales will start trending upwards over the next couple of quarters. However, they contradict a forecast also made October 16 by real estate data analyst Micheal Ferreira, who told an industry audience at an Urban Development Institute event that he expected the market to soften further and be in a weaker position a year from now.
Ferreira, principal of Vancouver real estate data firm Urban Analytics, pointed to softening demand in the new home market, which is causing a slowing in sales and a rise in unsold inventory. He added that tougher qualification requirements reduced demand not only from end-user buyers, but also from investors who may not be able to qualify for financing on the presale units they have already purchased and need to close on. Ferreira predicted an increase in contract assignments on presale units, and a jump in new homes being listed soon after completion, which would add to the rising inventory.