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Fresh off the heels of a Conference Board of Canada report that dismissed the idea of a housing bubble, Genworth shared its predictions for the condo market in eight major cities across the country.
The Metropolitan Condo Outlook was also prepared by the Conference Board of Canada for Genworth, the largest private residential mortgage insurer in the country. And much like the previous report, this study suggests that the market is “only slightly overheated but having basically sound economic underpinnings” will cool gently. Their reasoning? The ratio of monthly mortgage payments to incomes and rents has stayed close to historical norms.
Here’s a breakdown of the forecasts for each of the cities studied:
Demand has been sliding for about the past six years and starts are expected to fall in 2014 for the second straight year. Though absorptions are expected to fall this year, the drop in starts will be larger, meaning inventories should stay low in 2014. After that, starts are expected to rise by and annual average of 2.5 per cent from 2015 to 2018, to reach 1,270 units in 2018—still far below the 2012 peak. Sales are forecast to
increase by 4 per cent in 2014 and 5.2 per cent in 2015.
Demand from the resale market led to more activity in the new condominium market in 2010 and 2011. Builders increased starts more than 60 per cent, reaching a record 12,600 units. However, slow economic growth, tighter mortgage rules and and rising vacancy rates discouraged buyers in 2012 and sales of apartment condominiums fell by nearly 10 per cent through 2012 and 2013. Sales are expected to stay weak for the first part of the year, then pick up towards the end as the economy strengthens. Sales are anticipated to increase by 2 per cent in 2014 and an additional 2.5 per cent in 2015.
Reduced inventories and stable population growth are believed to bring about a modest bump in starts increases which are expected to grow by 1.9 per cent next year and then by an average of 1.1 per cent per year from 2016 to 2018.
Demand for condos in the nation’s capital has been weakening since 2011. The sales to active listings ration was down from 35.6 per cent in 2009 to 12.3 per cent last year. Rising supply has lead to led to a moderation in price growth and sales are set to fall in the first quarter of 2014 before rising later in the year. A stronger economy should perk up the market, and the report predicts a sales increase of 3.3 per cent next year and 2.8 per cent between 2016 and 2018. With a decline in active listings expected for 2014, the condo market should see modest price growth of 2 per cent.
Growth in resale market sales remained flat in 2013 and 2014 was off to slow start, which will leave unit sales pretty much unchanged on an annual basis. However, continued demand and solid population growth is forecast to boost sales by 1 per cent on average annual basis from 2015 to 2018. Sellers are expected to hold off on putting their units on the market this year, which should lower listings by about 2 per cent. With fewer listings, price growth will see a modest rise of 1.7 per cent. The median price growth should be about 1.8 per cent between 2015 to 2018.
Market absorptions were only about 30.7 per cent in 2012, but as economic growth improves, that should boost the rate to about 50.7 per cent. That should lead to a modest increase in starts between 2015 to 2018.
No metro can touch Calgary’s success as sales of existing apartments rose in double digit percentage terms over the last two years. The healthy market activity is expected to continue especially since the city has the highest average household income among the eight cities studied and home prices are relatively affordable. Strong demand is expected to continue with new unit absorptions expected to remain strong though not as high as the 71 per cent absorption rate in 2012 and the 66 per cent rate seen last year. Housing starts should see a bump in 2014 and retain a modest annual increase until 2018.
Existing apartment sales in the city rose 12 per cent in 2013, more than offsetting the decline of 2.7 per cent felt in 2012. Sales are expected to rise slightly faster than listings over the next few years, lifting the ratio to about 25 per cent by 2018 (this puts Edmonton within balanced market territory). Thanks to healthy demand, absorptions are set to rise and then stabilize after 2015. The median price growth for resale units is expected to rise by about 2.5 per cent in 2014 and linger around 2.8 per cent between 2015 and 2018.
The report suggests that the market is “improving gingerly” as annual sales declines appear to be over. Sales volumes are forecasted to rise, albeit modestly, each year until 2018. These gains, however, will still be below the peak 2009 volume and the past decade’s avearge, even by 2018. The absorption rate is expected to grow by 10 per cent this year, though more units are expected to come on the market in 2014, swelling inventories. Condo starts should then drop fractionally in 2014. However, this should give builders a bit more confidence later on and starts should increase again between 2015 and 2018.
Declining economic output and employment rates curbed growth in 2013, limiting demand for condos. Though with an improving economy, modest improvement is expected for 2014, lifting sales by about 2 per cent. Active condo listings dropped 9.5 per cent in 2013 and the report suggests a further 15 per cent drop is on the horizon for 2014 as sellers remain wary. As the market tightens, the median price should rise nearly 3 per cent. Condominium starts fell 16 per cent to 513 units in 2013 and are forecast to rise only slightly in 2014. Modest increases are expected between 2015 and the end of the forecast in 2018. But even then, starts are predicted to remain less than half of peak levels.