Canadian prices expected to rise 5.9% this year but only 0.7% in 2015

The national average home price in Canada is now projected to rise by 5.9% to $405,000 in 2014 and a further 0.7% in 2015, according to the latest forecast.

The Canadian Real Estate Association is also predicting similar price gains in British Columbia, Alberta, and Ontario while 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 fall by almost 2% in Nova Scotia.

Alberta and Manitoba are forecast to post average price gains of almost 2% in 2015, followed closely followed by Ontario at 1.3%. Average prices in other provinces are forecast to remain stable, edging up by less than 1%.

The CREA outlook report points out that an extraordinarily bleak winter delayed the start to the spring home buying season earlier this year. 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.

Sales are now forecast to reach 475,000 units in 2014, representing an increase of 3.8% compared to 2013. This is upwardly revised from CREA’s forecast of 463,400 sales published in June, and 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.

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