Reality of Canadian real estate is not all markets alike

Why would someone take a prediction for a national average real estate price decrease and automatically assume the same drop will happen in every Canadian market? 

And, why would someone use national average sales and assume all markets have reacted in a similar manner? 

The reality is that not all markets are the same — they vary due to unique local conditions, according to WinnipegREALTORS®. 

“I tend not to listen to reports from Edmonton about dramatic declines in the real estate market,” said WinnipegREALTORS® president Deborah Goodfellow. “That’s not our market.”

“I’ve been telling clients since October that we are an anomaly in Canadian real estate,” she added. “Historic data shows we never experience the extreme peaks and valleys of other markets.”

To show just how stable Winnipeg’s market is and how it is not subject to the same cyclical nature of more volatile real estate markets in Canada or the U.S., CMHC senior market analyst Jeff Powell said the Winnipeg Census Metropolitan Area’s largest annual residential price decline in the last 22 years has only been 1.8 per cent. 

While not immune to national and global developments, each Canadian market has its own local attributes that influence prices and activity within the various property types. 

In Winnipeg, the condominium market only represents 10 per cent of all property type sales, but in other major cities condos represent a significantly higher percentage of sales. 

In addition, Winnipeg has no where near the same degree of market speculators in condos or other residential property found in other cities — the vast majority of sales are based on real demand with buyers residing in the homes they purchase.

During the last six years, the Winnipeg market  has experienced  low double-digit annual average price increases, but both WinnipegREALTORS® and Canada Mortgage and Housing Corporation in their 2009 forecasts are calling for an end to similar increases. 

CHMC and WinnipegREALTORS® are quite close in predicting that either the average price will remain the same in 2009 compared to 2008 or will drop by 3.5 per cent. 

“If we are off this year,” said Goodfellow, “it will be modest.

“Over time, you’re not going to have all the competitive and multiple offers that were common early in 2008,” she added. 

“Not that prices are expected to fall, we’ll just have more inventory available to consumers.”

If the average price falls slightly in 2009, CMHC predicts it will bounce back in 2010. 

According to CMHC, buyers are now cautious, “however, strong labour markets, a growing population and relatively low prices should contribute to a recovery in the latter months of the year and into 2010.”

Based on WinnipegREALTORS®’ January MLS® dollar volume activity — a new record was set — sales were relatively strong at 524 units, but not at the same level as January 1997, which had 660 sales, establishing a lofty record for the month. 

January MLS® sales were down just eight per cent when compared to the same month in 2008, but traditionally January sales have been well below 600 or even 500 units.

Within the historic perspective, the January sales data shows the Winnipeg real estate market is holding its own entering 2009. 

The Canadian Real Estate Association’s website illustrates the difference between market performances. 

According to the website, the national average price change for all MLS® residential sales from January 2009 to January 2008, shows the average residential sale price dropped from $308,322 to $273,601 — a real slump. 

But these numbers closely approximate Ontario’s decline, which is due to the province’s population and dominance in national sales compared to many smaller provinces and territories in Canada. 

Other than Ontario, the only provinces to experience a real drop in average residential price in January were B.C., Alberta and New Brunswick.

Ontario is also struggling economically due to significant job losses in its manufacturing sector. 

Unlike Ontario, Goodfellow said Manitoba’s economy is functioning quite well relative to the rest of the country.

“We are in an enviable position since our local real estate market builds on Winnipeg’s economic strengths — stability, diversity and resiliency,” she said.

A recent Royal LePage Real Estate Services report said Winnipeg is “insulated to a certain degree” from the global economic downturn affecting other Canadian markets “by its strong regional  economy.”

The Conference Board of Canada said in its Metropolitan Outlook 2009 that “solid economic growth in recent years has led to steady employment expansion (in Winnipeg), with more than 20,000 jobs created between 2005 and 2008.’

“Job creation is the key for the housing market,” said Will Dunning, the chief economist for the Canadian Association of Accredited Mortgage Brokers, at a recent session with REALTORS®. 

“Having a job gives people the ability (and the confidence) to be active in the real estate market,” said Dunning. 

“And, it’s not just the current trend that matters. Since it takes time for people to get ready to buy a home, what matters is how many jobs have been created over the past three or four years.

“On that score, based on past job growth, housing demand (in Winnipeg) should remain very strong for some time to come,” he added.