A new housing forecast shows a geographic divide in Canada’s real estate market, with home prices expected to decline across cities in Western Canada by the end of 2019, but show growth in major centres from Ontario eastward.
A forecast released Wednesday by Royal LePage predicts a modest 0.4-per-cent increase nationally in home prices by year end compared with 2018. But within the national figures, there will be wide regional variation.
In Greater Vancouver, for example, Royal LePage predicts a 5.5-per-cent price decline as the city’s real estate market continues to languish, while booming Montreal is expected to lead home price growth in Canada this year, with a forecast increase of 4.5 per cent.
Royal LePage chief executive officer Phil Soper said regional economic weakness is continuing to depress housing markets in Alberta and Saskatchewan, while the Vancouver area is facing the fallout of major housing policy changes, including an increased foreign-buyers tax and a new tax targeting out-of-province owners whose homes are largely vacant.
Mr. Soper said the extreme run-up in prices in Vancouver between 2014 and 2017 also meant home prices in the region “overshot" during that period, leaving a lot of room for continuing correction in the market.
“It really got ahead of itself," he said. “You were seeing 20- or 30-per-cent per annum price increases on the huge base price of a detached home in that region.”
Calgary and Edmonton are expected to see prices fall by 3.6 per cent and 3 per cent, respectively, this year, while Royal LePage forecasts a 4.9-per-cent drop in home prices in Regina by the end of the year.
But as housing markets continue to sag in Western provinces, Royal LePage predicts price growth in the eastern half of the country, with strong economies and increasing buyer demand in markets such as Toronto, Ottawa, Montreal and Halifax more than offsetting the impact of tougher mortgage-stress-test rules.
In the Greater Toronto Area, for example, Royal LePage forecasts prices will climb by 1.4 per cent by the end of the year compared with 2018. Ottawa is expected to surpass that level, with prices climbing 1.6 per cent.
Mr. Soper said Royal LePage had previously forecast an improvement in the GTA market in the first quarter of 2019, but the recovery was delayed and sales did not begin to climb until the second quarter of the year, which has tempered the Toronto forecast for the full year.
Montreal was the opposite, with Royal LePage initially predicting a softening in the market this year. Instead, Mr. Soper said the firm has revised its forecast higher because the housing market has continued to boom.
The region’s strong economy and housing affordability has been a big part of the price growth, he said. Montreal did not have the price run-up over the prior decade that occurred in Vancouver and southern Ontario, which means homes are still a third the price of those in Vancouver. It makes ownership appealing as professionals move into the city, Mr. Soper said.
“For a world-class city of the size and importance of Montreal in economic and political terms, it’s one of the world’s great bargains in real estate,” he said.