This article by OPP Connect editor Adrian Bishop was originally posted on OPP Connect.
Canada’s property market is set to perform better than previously thought, with average prices rising 3.8 percent during 2014 to $397,000 (Canadian), 1.3 percent higher than estimated at the start of the year and $20,000 more than forecast in June 2013.
Prices are also expected to increase 1.1 percent on average in 2015, says the Canadian Real Estate Association (CREA) in an updated and extended market forecast. Sales volumes are also expected to grow.
The Canadian property market, which did not decline as much as other nation during the global crash, has been expected to fall, by some experts, but prices have continued to edge up and rise fast in leading cities, including Calgary, Vancouver and Toronto, and CREA has kept increasing its average home price forecast over the last year
Sales in 2014 are forecast to reach 463,700 homes, up 1.3 percent year-on-year and in line with the 10-year average. British Columbia is set to lead the way at 8.3 percent with growth in most other provinces expected to range from 3 percent to -3 percent, although a bigger fall is expected in Nova Scotia.
In 2015, Alberta is forecast to post the biggest average price rise of 2.5 percent, with Manitoba at 2 percent and Ontario, Saskatchewan, and Newfoundland and Labrador around 1 percent and others at 0.5 percent.
National resale housing activity got off to a worse start in 2014 than in other years, reflecting payback for stronger activity last summer and fall when buyers with pre-approved mortgage financing bought while rates were lower. It also accounts for the effect of tougher winter weather than normal in many parts of Canada.
“Taking this into consideration, and with mortgage rates having edged lower, home sales are expected to trend higher heading into the spring, and be further supported over the second half of 2014 by a widely anticipated pick-up in Canadian economic growth,” says the CREA.
Mortgage rates are also likely to increase during the second half of the year, says the CREA’s Chief Economist Gregory Klump, “Marginally higher mortgage rates are likely to counterbalance the lift provided by stronger economic and continuing job growth, and restrain the momentum for sales activity.”
This will benefit housing markets where sales are currently weak, but prices are more affordable. Sales in relatively less affordable housing markets are likely to be more sensitive to higher fixed mortgage rates.
“Affordability is expected to restrain activity in Canada’s most expensive markets, with annual sales forecast to decline marginally in British Columbia, and hold just below 200,000 units in Ontario for the fourth consecutive year. Alberta is the notable exception, where it is anticipated that strong economic and job growth combined with supportive demographic trends will result in strengthening annual sales activity,” says the CREA.
Data from February 2014 showed the actual (not seasonally adjusted) national average price for homes sold was $406,372, up 10.1 percent, although the February 2013 figures reflected declines in some of the most expensive sectors.