Increased consumer confidence will be a key factor affecting demand for Canadian residential properties in 2020, particularly in Western Canadian areas like Vancouver, where price increases above the national average and new home buyers will continue to help stabilize the market.
The RE/MAX 2020 Housing Market Outlook projects a strong 3.4 per cent average sales price increase nationally, double what was projected by the same report for 2019. Meanwhile, 51 per cent of Canadians are considering a home purchase in the next five years, up from 36 per cent at the same time last year, according to a Leger survey conducted by RE/MAX.
Most Canadian markets experienced only moderate year-over-year increases from 2018 to 2019, as buyers adjusted to new market conditions, such as the mortgage stress test. However, some areas fared worse than others.
In the Vancouver West region, buyer confidence was shaken by additional regulatory measures designed to cool the market, resulting in an average residential sale price drop of 7.5 per cent and a decline in the number of sales by seven per cent in 2019. The nearby Fraser Valley experienced a price drop of 4 per cent.
The good news for Western Canadian homeowners is that the roller coaster of the lows and highs is set to smooth out in the new year.
“The drop in sales in key British Columbia markets represents the last of the market conditions spillover from 2018,” says Elton Ash, regional executive vice-president, RE/MAX of Western Canada.
“Consumer confidence is poised for a comeback, leading to more healthy and sustainable growth, as more buyers have now acclimatized to the stress test and interest rates aren’t expected to increase in any meaningful way in 2020.”
In 2020, price appreciation in Vancouver is predicted to be a robust 4 per cent, as the report anticipates that younger buyers, such as single millennials and couples, will continue to drive the market.
The Fraser Valley is expected to witness substantial growth as buyers seek more affordable housing in communities like downtown Surrey, where a high number of businesses and educational developments in progress promise rich future work and lifestyle opportunities.
Rising prices don’t mean first-time buyers will be crowded out of the market, however. In Calgary, where slower economic conditions and a higher unemployment rate than the rest of the country contributed to a 3.7 per cent decrease in average residential sale prices in 2019, starter condo units are available for as low as $150,000. In another sign of market confidence, Calgary’s population is on the increase, with more people moving to the city from other parts of the province.
Winnipeg and Regina are bright spots in the West, with the number of home sales up 5 per cent in both cities in 2019. In Winnipeg, average residential sale prices for single-family homes and condominiums also rose by 1.5 and 0.8 per cent, respectively. Immigration to the city, reasonable prices and ample home inventory are expected keep the 2020 market strong there, the report projects.
The mood is different out East. Ontario still appears to be in the grip of the kind of heated cycle from which the Vancouver market is emerging, with the number of home sale transactions in Toronto up 12 per cent from the previous year. Average home sale prices are expected to rise 6 per cent there in 2020, after 4 per cent increases in each of the last two years, according to the RE/MAX report. However, improved overall affordability in the Greater Toronto Area is expected in 2020, as it experiences a construction boom to meet the demands of a rapidly growing population.
In Atlantic Canada, cities like Halifax and Saint John have experienced solid price increases of 6 and 5 per cent, respectively. The condominium market remains strong, largely driven by downsizing retirees. Charlottetown experienced 9 per cent growth in average residential sale prices in 2019, but prices are expected to be flat in 2020, according to the report.
The RE/MAX 2020 Housing Market Outlook includes data from local real estate boards and RE/MAX brokerages plus the results of an online survey of more than 2,000 Canadians conducted by Leger earlier this year, a portion of Leger’s online community of more than 400,000 people (a sample size Leger says yields a margin of error of +/- 2.2%, 19 times out of 20).
For more information, see the full RE/MAX 2020 Housing Market Outlook.