The mood has lightened for Canada’s realtors. Gloomy forecasts earlier in the year have been replaced by more optimistic projections for home sales volumes and prices. At the same time, Canada’s housing agency sees an ongoing alignment of housing costs and market fundamentals.
Falling mortgage rates lift sales
The Canadian Real Estate Association points to falling mortgage rates, strong employment numbers and immigration growth as the key factors in the improving outlook. The association expects to see sales volume rebound to 482,000 units; up by 19,000 from earlier forecasts. It returns the national average to the 10-year average level.
Quebec joins the influencers
British Columbia, Ontario and now Quebec are seen as the big influencers in the market. B.C. will be the main drag on sales with a 5.4% decline. Central Canada is forecast to pick-up the slack, though, with an 8.3% gain in Ontario and a 9.7% jump in Quebec. CREA expects Quebec, New Brunswick and Manitoba to set sales records by the end of the year.
Prices flow with inflation
CREA has reversed its 2019 price projection from slightly negative to slightly positive, with a 0.5% gain instead of a 0.6% decline, putting the national average at $491,000. The forecast notes a growing divergence between the east and the west with prices falling in B.C., Alberta and Saskatchewan but rising in Ontario, Quebec and the Maritimes.
For 2020, CREA predicts continued sales growth of 7.5% to 518,000 units. That seemingly good increase has to be measured against the very slow start to 2019 though. Once again B.C., Ontario and Quebec are pegged as the drivers of the increase, but Alberta is expected to see a welcome gain of 5%. Price growth should remain in line with inflation at 2.1%, for a national average of $501,400 next year.
Balance returning
Canada Mortgage and Housing Corporation says the gap between home prices and market fundamentals is narrowing, but it continues to wave its yellow flag indicating a moderate degree of vulnerability.
The Six and the Hammer downgraded
The most significant changes in the latest Housing Market Assessment dropped the big and busy Toronto and Hamilton markets from high vulnerability to moderate. CMHC says evidence of overvaluation has diminished enough to be downgraded to low from moderate in the Greater Golden Horseshoe region.
B.C. is variable
The move leaves Victoria as the only market in the country with a high vulnerability rating, although overheating has eased in the B.C. capital. Moderate evidence of overvaluation persists in Vancouver, despite the price declines outlined by CREA.
Overall CMHC points to dropping home prices as the key component in the return to balanced market fundamentals.