What is in store for the local MLS® market in the New Year?
As is so often the case, we glean information from trends that have transpired to help us determine what lies ahead.
So what drove 2011 and was also present in 2012 that is likely to remain in place this year? Let’s start with interest rates. With the overnight Bank of Canada rate remaining steadfast at one per cent and no one calling for much movement due to global debt issues, it should be a relatively safe bet to predict interest rates will stay historically low. As has been evident for the past few years, when a low interest rate environment has been the norm, those in a position to finance a property on such attractive terms will be back in the market in 2013.
While interest rates make housing more affordable, jobs give people the means and confidence to acquire a home. Manitoba’s employment statistics were strong at the end of 2012. The increase in December jobs brought the unemployment rate down to 5.2 per cent. And sometimes overlooked in employment figures and analysis is the labour force participation. The rate is as high as it was in 2007 when WinnipegREALTORS® set its all-time benchmark for MLS® sales. To have so many double-income families active in the workforce is a real plus for the housing market.
The Manitoba Bureau of Statistics reported at year-end that Manitoba’s seasonally adjusted workforce at 673.4 thousand Manitobans has never been higher. Not surprisingly, Manitobans are positive about the outlook for job growth. More people expect the job situation to improve than worsen over the next six months.
The Conference Board of Canada indicated that November 2012 marked the 10th consecutive month in which the sentiment to make a major investment in housing was positive.
Helping to push high employment numbers is a growing population. Immigration has been an important part of Manitoba’s economy for the past few years, and has more than offset losses to inter-provincial migration to other Western Canadian provinces. Statistics Canada noted Manitoba had a 22 per cent smaller net loss in the third quarter of 2012 than in the third quarter of 2011.
Even if immigration numbers fall off somewhat in 2013 compared to 2012, the sheer number of new Manitobans employed in the last few years will maintain home buying momentum this year. A study done by professor Tom Carter on Manitoba’s Provincial Nominee Program in 2009 showed immigrants have a real desire and preference for homeownership. The study showed a homeownership rate of 66 per cent among longer-term immigrants.
Another factor contributing to housing purchases, documented by WinnipegREALTORS® in a 2011 discussion paper, is the lack of good rental accommodations in Manitoba. There has not been enough new purpose-built rental accommodations for the growing population, and some existing rental units have fallen by the wayside due to neglect. Consequently, Winnipeg has been recognized nationally as having one of the tightest rental real estate markets in the country. A dearth of rental availability means people in need of housing turn to homeownership.
Encouraging as it is that Winnipeg’s rental vacancy rate in October 2012 went up from 1.1 to 1.7 per cent, it is still one of the lowest in the country and still should push more would-be renters into homeownership in 2013.
The annual WinnipegREALTORS® MLS® forecast will take place on January 16. Once again, projections will be made and there will be a review of the past year’s performance. This event is open to the public. A change affecting the 2012 real estate market was tougher mortgage regulations, including a reduction of the amortization period from 30 to 25 years. First-time buyers, who are an important segment of any real estate market, were more affected by the measures given their weaker starting position — they lack the equity acquired by owning an existing house.
The projections made at the start of the year for 2012 ended up being very close to what actually occurred in the market over the course of the year. The results from 2012 will help frame the January 16 projection for what in all likelihood will be another good year for the local real estate market.