Photo: David J Laporte/Flickr
While pockets of risk remain in Toronto and Vancouver, a broad-based downturn for Canada’s condo market is unlikely, according to the latest Conference Board of Canada condo report commissioned by mortgage insurer Genworth Canada.
“Population, economic and employment growth in eight Canadian major cities all point to a stabilizing condo market,” the report reads, predicting that each market studied will see modest price gains over the next two years, with Calgary experiencing the largest growth both years at 6.6 and 3.5 per cent respectively.
“Continued growth in immigration, affordability pressures in major cities, and aging baby-boomers looking to downsize are all factors that support continued demand for condos in urban centres,” the report continues.
But does continued price growth put affordability at risk? The conference board says increases in average household incomes will help keep mortgage costs affordable.
“Our research has long shown that the strong underlying economic factors in Canada would help most condominium markets achieve a ‘soft landing’,” said the report’s co-author Robin Wiebe, echoing the forecast the Canadian Mortgage and Housing Corporation made for Canada’s overall market on Wednesday.
“Despite fluctuating sales and listing trends, markets are expected to be balanced across the country, with a slight lean towards the buyer in Ottawa, Montreal and Quebec City,” Wiebe continued in the conference board report.
Regional highlights from the report
Expect to see both sales and prices grow in the resale market over the next few years after enduring several years of decline. Meanwhile, falling starts and completions this year will begin trimming new-unit inventories, setting the stage for modest starts growth.
The condo market is recovering along with the overall resale market, although slowing offshore demand threatens to expose the region’s poor affordability. The conference board predicts resales will grow modestly throughout the medium-term, as will starts after they stabilize this year.
A strong economy lifted condo sales sharply in 2013 and will keep them growing modestly over the next few years. While condo starts are forecast to pull back in 2014 — following very large jumps in 2012 and 2013 — they are expected to grow moderately over the rest of the outlook.
Canada’s hottest housing market enjoys excellent condo affordability due to its healthy average household income (the highest of all eight cities studied) and relatively modest prices. Calgary’s robust economy is boosting near-term resale volumes and price growth while ongoing economic growth will maintain housing demand over the following years.
Toronto’s condo market will cool slightly but avoid the collapse many fear due to healthy population growth, a solid economy and the desirability of downtown living.
Condo resales are expected to improve in 2015 and continue rising for several years. Condo starts, meanwhile, will be flat in 2015 and then rise gradually.
Condo resales are expected to decline this year, before bouncing back in 2015 while rising inventories of unsold new condos will slow the pace of construction.
A stronger economy is expected to stabilize sales of existing condos this year and then lift them in 2015, while starts are expected to fall for the second straight year in 2014. Lower inventories of unsold new units should bring builders back to the market in 2015.