Manitoba and Alberta will be the only provinces to enjoy a home sales increase in 2013, according to an updated forecast recently released by the Canadian Real Estate Association (CREA).
Meanwhile, the rest of Canada is expected to experience and overall down swing in sales activity, resulting from tightened mortage rules and a shortage of new listings.
“A rebound in sales in some of Canada’s largest and most expensive markets, similar to those we saw following previous mortgage rule changes, has so far remained elusive,” said CREA president Wayne Moen. “That said, the slowdown in many big markets is being offset by activity in many smaller and more affordable markets that were less impacted by last year’s mortgage rule changes. This serves as a reminder that all real estate is local.”
CREA forecasts a 2.6 increase in residential sales for 2013 in Manitoba, and a 2.1 per cent increase in 2014.
The long-anticipated slowdown in Canadian housing activity is well underway, according to Scotiabank senior economist and real estate specialist, Adrienne Warren.
“Home sales have dropped more than 10 per cent from last spring, and are now running below historical averages in most major cities,” she said. “Prices in turn are levelling out, with the return of balanced market conditions.
“Demographic shifts — particularly Canada’s aging population — will have important implications for housing demand in coming decades,” she added. “Contrary to some dire predictions, population aging will not fuel a demographically-induced selloff ... However, an aging population does point to a lower level of housing turnover, sales and listings.”
CREA chief economist Gregory Klump said that “year-over-year comparisons will continue to reflect the long shadow cast by higher sales prior to last summer’s policy tightening.”
Last July, federal Finance Minister Jim Flaherty lowered the amortization period for Canada Mortgage and Housing Corporation-insured mortgages from 30 years to 25 years, a move that real estate industry observers correctly predicted would lead to a drop in sales, especially among first-time home buyers who now face higher monthly mortgage payments as a result of the change.
Klump said with the mortgage rules remaining in place, there will be less volatility in the market than had been the case in past years. And interest rates “are also expected to remain low as the economy grows and adds jobs, which is supportive of the resale housing market.”
“Immigration also will have a profound impact on housing demand over the next two decades,” according to Warren, “being increasingly the dominant source of new household formation in Canada. The majority of new immigrants initially move into rental units, though most eventually become homeowners.”
She said immigrant households are more likely to reside in large- and mid-sized urban centres, which could fuel relatively stronger housing demand and prices in these areas.”
Winnipeg and Manitoba have benefited from a boom in new immigrants, which has put great pressure on the availability of units in the rental market, resulting in a boost in resale housing demand.
In 2014, CREA is predicting a rebound in national sales by 4.5 per cent, reflecting a slow but steady improvement in activity. “This would still leave national sales about one per cent below their 10-year average,” according to the CREA forecast, “with activity not expected to return to levels recorded in the first half of 2012 at any point in the forecast horizon.”
Locally, WinnipegREALTORS® president Richard Dettman said this coming spring’s sales results — traditionally the busiest time of the year for transactions — will more accurately reflect the strength of the Winnipeg and area housing market than its performance during a seemingly too long and too bitterly cold winter.