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Canada’s contracting economy and slowing job growth are creating a climate for the country’s condo market to safely cool off, according to a report released today.
The Insights Into the Apartment Condominium Market report from mortgage insurance firm Genworth Canada and the Conference Board of Canada, a non-for-profit research organization, provides an outlook for the rest of 2015 that contrasts with concerns of overheating.
“While conditions vary across markets, with greater cooling in oil-exposed regions, overall, the numbers point towards balanced resale activity which will support the safety and soundness of the condo market,” said Genworth CEO Stuart Levings in a press release.
Statistics Canada data released yesterday confirmed that the nation slumped into a recession over the second quarter of this year, and now Genworth Canada is predicting the national real GDP will grow by 1.5 per cent in 2015, down from 2.4 per cent last year.
Meanwhile, the Canadian labour market is expected to grow at a rate of less than 1 per cent for the second year in a row. Looking forward, Genworth is predicting employment gains to grow to 1.1 over 2016, with unemployment at 6.9 per cent this year and next.
While these factors are expected to be felt Canada-wide leading to moderation in the condo market at the national level, the outlook varies from region to region.
Toronto’s population, which is expected to increase by about 100,000 people per year from 2016-2019, coupled with a healthy local economy and job-creation levels, will see the median condo resale price climb to about $332,000 in 2016, up from the expected $326,000 this year. However, housing starts will slow next year to 12,435, down from a projected 14,780 this year.
Vancouver, on the other hand, is expected to see an increase in starts to 9,466, a 5.3 per cent increase over the forecast for this year, which sits at 8,990. Demand in this city is partly fueled by buyers from China, the report noted.
“Accordingly, forecasts of a slower Chinese economy present a downside risk,” the report, authored by Conference Board economists Jane McIntyre and Robin Wiebe, said. “Nonetheless, apartment condominiums’ relative affordability ensures their ongoing viability.”
The Edmonton housing market is still hurting from lower oil prices, but according to Genworth, the worst effects may have already been felt. Condo resale prices here are expected to stay the same throughout 2016, while energy-sector cousin Calgary could see nearly imperceptible resale price increases.
As oil prices increase, Genworth predicts Calgary will recover from its forecasted 25.5 per cent drop in existing condo sales this year to a slight increase of 1.3 per cent next year to a total of 4,174 resales.
None of the eight markets examined are expected to see a drop in resale prices next year.
“Regional variations will continue to be significant as economic conditions vary widely by city,” Genworth concluded in a press release.