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The Canadian housing market has overcome a plunge in oil prices and a wave of new condo units flooding some regional pockets, and according to RBC’s quarterly economic update and provincial outlooks released today, it will continue to rally for the rest of this year.
RBC is forecasting that national existing home sales will increase 5 per cent this year over 2014, making for the second-best year on record at 505,400 units.
With the strong national resale performance, RBC expects to see home prices climb, although the pace at which this happens is projected to remain relatively consistent with last year’s. RBC is predicting a 4.6 per cent increase this year following 2014’s increase of 4.8 per cent.
Low interest rates have been enough to stoke demand in spite of hits taken in oil prices and an influx of condo completions this year, said RBC.
A spike in completions in a market can lead to oversupply causing prices to drop. Earlier this year, Toronto saw a record number of apartment units — mostly condos — completed. In January, 10,400 were completed, which was double the previous monthly record, according to RBC.
And more units and homes are on their way through the pipeline in Ontario. Over the first eight months of 2015, housing starts were up 9.3 per cent year-over-year. Province-wide, the bank is predicting starts to hit 64,900 units this year, the highest total in three years. The following year, numbers are expected to decline slightly to 64,300.
This August in British Columbia, RBC said home prices saw their highest annual increase since 2010. Housing starts are forecasted to jump to 33,000 this year, up from 28,356 last year. Like in Ontario, a marginal fall is expected for 2016. RBC expects British Columbia starts to finish 2016 at 31,000.
Although national numbers — and the performance of Ontario and British Columbia — has been strong, that’s not the case in the oil-producing markets.
For instance, Alberta is expected to finish the year at 37,600 starts before plummeting nearly 19 per cent to 30,500 by the end of 2016. This year’s forecast would already be a drop of about 8 per cent.
Nationwide next year, RBC expects interest rates to climb resulting in “a slight easing in resale activity, slowing to 3.2 per cent.”
By the end of 2016, the bank predicts housing starts in Q4 of next year will hit 176,000, down about 8 per cent from this year’s forecasted starts of 192,000.