Residential property sales in Canada are forecast to increase by 3.8% this year compared to 2013, according to revised figures from the Canadian Real Estate Association (CREA).
The data reflects stronger than expected sales in recent months. Even so, sales activity is expected to peak in the third quarter as the impact of a deferred spring dissipates and continuing home price increases erode housing affordability.
This would place activity in 2014 slightly above but still broadly in line with its 10 year average. Despite periods of monthly volatility since the recession of 2008/2009, annual activity has remained stable within a fairly narrow range around its 10 year average. This stability contrasts sharply to the rapid growth in sales in the early 2000s prior to the recession.
British Columbia is forecast to post the largest year on year increase in activity at 11.9% followed closely by Alberta at 7.7%. Demand in both of these provinces is currently running at multi year highs.
Activity in Saskatchewan, Manitoba, Ontario, Quebec and New Brunswick is expected to come in roughly in line with 2013 levels, with sales increases ranging between 1% and 2% in the first three provinces and edging lower by about 1% lower sales in the latter two provinces. Sales in Nova Scotia and in Newfoundland and Labrador are projected to be down this year by 3.9% and 5.2% respectively.
Mortgage interest rates are expected to edge higher as Canadian exports, business investment, job growth, and incomes improve. These opposing factors should benefit housing markets where demand has been softer but prices have remained more affordable.
Sales in relatively less affordable housing markets are likely to be more sensitive to higher fixed mortgage rates, the CREA report also says.
National activity is now forecast to reach 473,100 units in 2015, representing a decline of four tenths of 1%. Sales activity is forecast to grow fastest in Nova Scotia at 3.3%, followed by Quebec with growth of 1.3% and New Brunswick at 1.3%. Alberta is the only other province forecast to post higher sales next year with growth of 1%.
In other provinces, activity is forecast to decline in the range of between 1% and 2%. In British Columbia and Ontario, this trend reflects eroding affordability for single family homes, the report says.
The national average price has evolved largely as expected since the spring, resulting in little change to CREA’s previous forecast so it is projected to rise by 5.9% to $405,000 in 2014, with similar price gains in British Columbia, Alberta, and Ontario. Increases of just below 3% are forecast for Saskatchewan, Manitoba and Prince Edward Island. Newfoundland and Labrador is forecast to see average home price rise by about 1% this year, while Quebec is forecast to see an increase half that size.
Prices are forecast to be flat in New Brunswick and recede by almost 2% in Nova Scotia. The national average price is forecast to edge up a further 0.7% in 2015 to $407,900. Alberta and Manitoba are forecast to post average price gains of almost 2% in 2015, followed closely by Ontario at 1.3%. Average prices in other provinces are forecast to remain stable, edging up by less than 1%.
Looking at the year so far, the CREA report says that the deferral of sales and listings during an extraordinarily bleak winter delayed the start to the spring home buying season. This deferral boosted activity in May and June as properties were snapped up after finally hitting the market, particularly in markets with a shortage of listings.
Although this boost was and still is expected to be transitory, sales have yet to show signs of cooling as activity strengthened slightly further over the summer. The increase reflects continuing strength in home sales among large urban markets that initially drove the spring rebound together with gains in markets where activity had previously struggled to gain traction. Lowered mortgage interest rates supported this trend.
This article was republished with permission from Property Wire.