Last year, the combination of extremely tight rental market conditions (less than one-per-cent vacancy rate) and a large influx of new immigrants propelled home prices higher than was forecast at the start of 2010, according to Peter Squire.
The WinnipegREALTORS® market analyst said home prices rose by 11 per cent in 2010. In fact, Winnipeg has had seven consecutive double-digit price increases including last year. As a result of the continued years of increases, the average residential-detached sale price finished 2010 at $241,000. Condo prices rose by eight per cent reaching an average sale price of $200,000 for the first time.
By the end of last year, MLS® sales were up ever so slightly over 2009 to finish over the 12,000 mark. The result was that 2010 became the fourth highest MLS® sales year of all time and had the highest MLS® dollar volume ever at over $2.7 billion.
Squire said the conversion of MLS® residential-detached listings to sales dropped under 70 per cent for the first time since 2001. He attributed the decline to housing affordability for first-time buyers.
“With price increases becoming the norm over the past eight years, the entry-level market has seen more of a drop off in activity than the move-up market,” he added.
Squire said that is one reason WinnipegREALTORS® is pushing for indexing of the provincial government’s land transfer tax and an exemption to the tax for first-time buyers, as is the case in Ontario and B.C. Both provinces share with Manitoba the highest land transfer tax rate in the country.
Due to pricing becoming more of an issue in the local market, he added, multiple offers resulted in an affordability flight from higher-priced residential-detached properties to condominiums. A number of apartments converted to condominiums and priced attractively under $200,000 proved a winner for first-time buyers.
In the last five years, condominium sales have increased roughly 50 per cent, but still only represent 12 per cent of total MLS® market sales activity. Nearly three out of every four MLS® sales are residential-detached or single family homes.
Squire said there appears to be no valid reason, given Winnipeg’s solid economic fundamentals, not to expect more price increases in the upper single digits, or even higher. He expects another year of 12,000-plus MLS® sales, due to continuing population increases and still very favourable mortgage rates.
According to Squire, a critical factor this year is to entice empty-nesters out of single-family homes in order to free up more listings and create better sales activity.
While there were some new rental units built last year, they were hardly enough to make a dent in the vacancy rate, he added.
Squire said new condo projects, as well as new home construction, including new developments and infill, will help take some of the pressure off of the existing resale market which is the primary source of MLS® sales activity.
One positive sign to begin 2011 is the news that Qualico will build 648 new single-family homes on the remaining land along the Perimeter in River Park South.
“Any new additions to the housing mix are positive when there is increasing demand for housing,” said Squire. “The challenge is always to get more units added throughout all quadrants of the city, as Winnipeg residents are loyal to their particular neighbourhoods and areas of the city, and they prefer to move in relative proximity to where they presently live.”
Squire said a potential limiting factor on the housing market is the possibility of flooding in the spring. The “Flood of the Century” had a negative impact on the residential market in 1997, he added.