At the end of 2006, Canadian Real Estate Association’s economist Gregory Klump and other real estate market analysts had a sense that the real estate market in 2007, particularly the MLS® market, would not be quite as robust as it had been in past years.
They were mistaken — every month, a new sales, dollar volume and average price record was being set.
The same prediction that was made at the end of 2006 was also being applied to the last half of 2007.
In a July CREA press release, Klump was talking about resale housing activity gradually easing up from the strong pace set in the first half of 2007 because of higher interest rates.
Yet in the same release, it was noted Canada’s major markets, including Winnipeg’s, had a trio of resale housing activity records. In June 2007, more homes than ever before — 31,300 to be precise — traded hands on MLS® systems across the country. Winnipeg was among a number of cities that established their own best-ever June sales. There were also records set for second-quarter activity.
CREA has revised its earlier prediction and is now calling for a new national MLS® sales record for 2007. In addition, the average price will inevitably set another record. In June this year, the average price climbed 10.4 per cent over June 2006 to reach $335,180.
At the start of the year, both the Canada Mortgage and Housing Corporation and WinnipegREALTORS® in their annual forecasts said there would be some leveling off in average price increases and home sales when compared to the previous four years.
By using the first seven months of 2007 as a guide, everyone is now aware that the predictions were incorrect. For example, the Winnipeg MLS® market continues to set new monthly records.
The strength of the local market helps explain why CMHC held a housing market update on Wednesday, August 15. CMHC has adjusted its year-end forecast upward for both the resale home and new home markets. The Crown agency is now predicting resale home sales will climb over 12,000 for 2007.
CMHC’s senior market analyst, Jeff Powell, said Winnipeg’s resale and multi-family markets continue to show remarkable strength.
In the new home market, single-detached starts are still holding their own and will likely match the 1,700 recorded in both 2006 and 2005.
Powell said net migration is contributing toward housing market strength. During the first quarter, Manitoba lost only 228 people (mostly to Alberta) compared to 1,650 in 2006 and 1,570 in 2005.
With the exception of Alberta and New Brunswick, Manitoba enjoyed a net migration over all the other provinces and territories. When you add the net influx of international immigrants — a real Manitoba success story resulting from the province’s noted nominee program — there has been an overall gain of approximately 6,500 people. This translates into roughly 2,400 new households for the Winnipeg market area.
At any given time, the MLS® inventory can be as low as 2,000 units which results in depleted inventories within various neighbourhoods and in specific price ranges.
With the average new home price now at $265,000 as well as a depleted resale inventory, affordability becomes a real issue for many people looking for accommodation when they move to Winnipeg.
On the positive side, the revised multi-family start forecast, of which 60 per cent represents new condominium projects, is up significantly over CMHC’s November 2006 forecast of 1,000 units for 2007. To the end of July, there have actually been 1, 500 starts. The growth in multiple-family starts has been attributed to the need to build more townhouses to meet the demand for more affordable housing units.
With a rent control regime still entrenched in Manitoba, there is little hope that investors will soon begin building a profusion of new rental units. Urgent action is required to examine the current housing regulatory environment which is preventing the creation of more affordable housing units.
Despite benefiting from all the exceptional resale market activity, WinnipegREALTORS® is on record as calling for policies to expand the new and rental housing inventory and create a more balanced market.
Jeff Powell said there has been impressive new housing activity in southeastern Manitoba, including Steinbach, Winkler and the RM of Hanover. Steinbach’s starts actually outpaced Brandon’s.
Vacation homes continue to show growth in resort areas such as Lac du Bonnet and Gimli.
Even with double-digit MLS® average price increases predicted for 2007, Winnipeg still has one of the most affordable markets among Canadian cities. To nobody’s surprise, Calgary and Vancouver are at the opposite end of the spectrum.
Powell emphasized that the local market is significantly different than the market in the United States. He confidently asserted that the demand in the Winnipeg market is real and not artificially created by speculative home purchases and high-risk mortgages as has been the case in the U.S.
He said the local market is benefiting from a low unemployment rate and a well-diversified economy that is firing on all its cylinders.
Unlike the U.S., he added, the local housing price increases have nothing to do with speculative demand.