Job market trends and low interest rates are supporting the housing sector in Canada with sales remaining stable and prices predicted to rise this year and next. The latest data from the Canadian Real Estate Association (CREA) shows that residential property sales increased by 3.6% last month – prices are also rising, up 3.7% year on year.
The CREA report says that national sales activity has held fairly stable since it moderated last August in the wake of changes to mortgage lending rules and guidelines. Although sales in the first quarter of 2013 remained virtually on par with those in the fourth quarter of 2012, the monthly sales trend improved toward the end of the first quarter and accelerated in the second quarter.
National sales activity is now forecast to reach 443,400 units in 2013, a fall of 2.5% from 454,573 sales in 2012, but is an upward revision from the previous forecast decline of 2.9%. Alberta and Prince Edward Island are the only provinces where sales are projected to post an annual increase in 2013, with declines in other provinces reflecting the impact of more restrictive mortgage lending rules and guidelines.
CREA has also revised its forecast for national activity in 2014 to 464,300 units, representing a rebound of 4.7% and reflecting a slow but steady improvement in activity. This still leaves national activity 0.1% below its 10 year average, with activity remaining below levels recorded in the first half of 2012.
British Columbia is forecast to see the strongest sales increase in 2014 with an increase of 9.9% compared to a weak result in 2013. Most other provinces are forecast to post gains in the range between 2% and 6%, reflecting moderate economic, job, population, income growth and low mortgage interest rates. In contrast to sales, average prices have held firmer than expected. The national average home price is now forecast to rise by 2.1% to $370,900 in 2013.
Steep declines in sales activity in Greater Vancouver and Greater Toronto during the second half of 2012 weighed heavily on average prices in British Columbia, Ontario and nationally at that time. Since then, their share of national sales activity has improved and their weight in the national average price calculation has risen. Ontario, British Columbia and national average prices are likely to rise above year ago levels during the second half of 2013 as a result.
The upward revision to the average price forecast also reflects stronger than previously expected price growth this spring in other housing markets across the country. Average price gains in 2013 are projected to be strongest in Alberta, Saskatchewan, as well as Newfoundland and Labrador, with annual increases of between 4% and 5%. At 3.6% average price growth, Manitoba is also forecast to exceed the national result.
The national average price forecast for 2014 has also been revised upward to $377,700, an annual increase of 1.8%. As in 2013, part of the increase reflects an expected increase in the share of total sales among relatively more expensive provincial housing markets and a further increase in their weight in the national average price calculation.
At 3.4%, Alberta is forecast to post the biggest average price increase in 2014, with gains in Newfoundland and Labrador, Saskatchewan and Manitoba running just ahead of inflation. Average prices in Quebec and New Brunswick are expected to be largely flat in 2014, with other provinces posting gains in the range from 0.5% to 1.5%. ‘Canadians remain confident about the value of home ownership. Job market trends and low interest rates remain supportive for Canada’s housing sector, so we remain upbeat about prospects for sales and average prices this year and next,’ said Gregory Klump, CREA’s chief economist.