Thanks to our friends at First National for their quarterly review, intended to provide an overview of the Canadian housing market.
With the first quarter of 2016 finished two key monitors of real estate and housing in Canada are updating their projections for Q2 and beyond.
The Canadian Real Estate Association had forecast some rebalancing, expecting slower national price growth due to slowdowns in British Columbia and Ontario during 2016. However, continued low interest rates – and the expectation that they will stay low longer – have CREA now predicting 2016 will look very much like 2015.
At the extremes the Association is calling for a 12% increase in MLS sales activity in B.C. (concentrated in the Lower Mainland) while Alberta is projected to show a 19% decline. Ontario is expected to be held in check with a 0.3% gain, due to a lack of affordable, low-rise housing. Elsewhere CREA sees economic improvements providing modest gains in Manitoba, Quebec and the Maritimes with resale increases ranging from 1.0% to 3.4%. The forecast for the national average price of a home has been increased to $478,100 – up 8.0% from 2015.
Looking to 2017 CREA expects an overall slowdown, largely due to reduced affordability in B.C. and Ontario. It is actually predicting a sales decline in British Columbia. Nationally resales are forecast to rise just 0.4% with the average price increasing by a modest 1.1% to $482,500.
Canada Mortgage and Housing Corporation data delivered in the quarterly Housing Market Assessment tends to support CREA’s forecasts. The HMA examines 15 major markets across the country and the Q2 report highlights on-going overvaluation and overbuilding in several of them.
Calgary, in particular, is noted for its overvaluations relative to the city’s overall economy, while Greater Toronto and Greater Vancouver are noted for their rapid price-acceleration. Vancouver’s overvaluation rating has been raised to ‘moderate’, from ‘weak’, in the Q2 report.
Montreal is also deemed to have ‘moderate’ overvaluation, based on the strength of its broader economy. The city’s condo market is seen as somewhat overbuilt. And Hamilton, Ontario is also showing signs of overvaluation. This is, no doubt, due to price increases triggered by an influx by buyers trying to escape the expensive Toronto market.