Photo: James Bombales
The Canadian housing market started to warm up in March, as national home sales inched up 1.3 per cent month-over-month. But that bump in activity didn’t come from the markets you might expect.
Typically hot markets like Toronto and Vancouver continued to underperform in March, with GTA sales rising a mere 2.1 per cent, while Vancouver sales fell 8.6 per cent.
The cities that are starting to heat up? Montreal and Ottawa, which saw sales spikes of 5.1 and 22.1 per cent, respectively, last month.
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“Canadian housing markets are likely to remain under-pressure from the recent [new mortgage rules], higher mortgage rates, and in some cases provincial regulation,” writes TD senior economist Michael Dolega, in a recent note. “However, lower-priced markets where affordability is good should generally outperform in the current environment.”
According to Dolega, historically affordable markets like Montreal and Ottawa are able to dodge the majority of the effects of the mortgage stress test introduced earlier this year.
Montreal has already seen a sales increase of 7 per cent in the first quarter of the year, and is predicted to continue its strong performance into the spring. Ottawa home prices jumped 8 per cent year-over-year in March, with the average price of a low-rise home and a condo coming in at $447,600 and $275,600, respectively, according to data from the Ottawa Real Estate Board.
And according to BMO senior economist Sal Guatieri, both cities are being bolstered by a rise in Millennial demand, as young buyers seek out more affordable markets for their first home purchase.
“We expect Millennials to bolster other markets like Montreal and Ottawa, as those looking for better affordability consider options beyond Toronto and Vancouver,” he writes in a recent note.