Thanks to higher home inventory levels in many cities and a trend toward more affordable condos in some areas, Canada’s housing market is likely to experience a significantly smaller price increase next year. According to a new report from Re/Max, average sale prices are anticipated to rise a modest 2.5 per cent nationally in 2015 compared with a 6.2 per cent increase in 2014.
“As affordability becomes an issue in urban centres, first-time buyers are looking towards condominiums both for lifestyle and for value,” stated Re/Max Western Canada regional vice president Elton Ash in the report.
The report also notes that in markets such as Montreal, Kingston, Burlington and Victoria, condos are increasingly attracting Baby Boomers looking for affordability and amenities within walking distance.
Will the Bank of Canada raise the country’s historically low interest rate?
The Bank of Canada has hinted at a rate increase in late 2015, and some experts have speculated that the increase could come as early as May. Re/Max says an interest rate hike could potentially result in a spike in buying activity, as buyers rush to secure their mortgage before the increase comes into effect.
“Overall, a rate increase is not anticipated to have a dramatic effect on the real estate market, as it would likely be minor and rates would continue to be low,” the report says.
Other factors that will impact Canada’s housing market in 2015
Re/Max describes the economic outlook for Canada in 2015 as “stable,” citing a Bank of Canada projection that the GDP will grow by approximately 2.5 per cent, a rate that is roughly on par with 2014’s growth.
“Small increases in employment rates and wages are anticipated as well,” the report reads. “Canada expects to welcome between 260,000 and 285,000 new permanent residents in 2015, which should positively impact the residential real estate market.”
But as always, Canada’s housing market is made up of many diverse individual markets. To get a real sense of what’s in store for the country in 2015 we turn to…
Regional highlights from the report
For Canada’s most expensive housing market, Re/Max projects the number of homes sold in 2015 will remain largely the same as levels in 2014, while house prices will see an increase of around three per cent.
Across Vancouver, the realtor group says young families and equity downsizers will drive demand. Buyers who cannot afford detached homes on the West Side of Vancouver proper will take advantage of the relative affordability of townhouse living. Demand for West Side homes will continue to be driven by off-shore buyers who can afford to pay the two million dollar-plus price tag.
Calgary is projected to see a four per cent increase in unit sales and a more modest three per cent increase in average residential sale price increasing to $497,500 in 2015. Buyers who are looking to move up are likely to drive demand in Calgary’s real estate market in 2015. Also, the low vacancy rate for rentals has made potential tenants look at purchasing sooner than they anticipated. Condos and townhouses are also expected to represent a growing share of the marketplace going forward.
More realistic pricing in 2014 has inspired confidence among buyers — a trend that is expected to continue in 2015. Toronto should remain a seller’s market, Re/Max says, although the condo market is projected to be more balanced as developers release inventory and investors seek to unload their units.
The recent municipal election has brought a feeling of stability to the city, which generally bodes well for local real estate. With political stability and the city set to be showcased by the 2015 Pan AM Games, pent-up demand may result in strong price appreciation in the latter portion of 2015.
Overall, Re/Max anticipates a balanced market in 2015, with a slight increase in sales and average residential sale price. The political uncertainty that held the market back in 2014 is not projected to be a factor next year. The economic outlook is positive and the employment rate is improving, though the provincial government’s current austerity budget may limit economic growth.
Want to delve even deeper into the report? You can read it in its entirety here.