Average property prices in Canada set to rise by 2% in 2015, says latest forecast
The national average property price in Canada is forecast to increase by 2% to $442,400 in 2016, according to the latest forecast from the Canadian Real Estate Association.
But there is likely to be regional variation. For example, increases are forecast to be slightly larger but less than 3% in British Columbia, Saskatchewan, Manitoba, Ontario, New Brunswick, and Prince Edward Island, with gains in some provinces reflecting an expected rebound from levels in 2015.
Price growth in 2016 is forecast to be strongest in Ontario with growth of 2.8% due to an ongoing supply shortage of listings for low rise homes in and around the Greater Toronto Area, the CREA forecast report says.
‘Alberta and Quebec are forecast to see average home price growth of about 1.7% and 0.8% respectively in 2016, while Nova Scotia and Newfoundland and Labrador are forecast to edge slightly lower.
The report explains that the national average price has run higher than expected since CREA’s last forecast, in part reflecting a jump in the proportion of higher priced home sales this spring and early summer in B.C.’s Lower Mainland, in and around the Greater Toronto Area (GTA) and Calgary. This trend now appears to be receding, causing the national average price to follow suit.
However, recent trends in the Home Price Index, which is not affected by changes in the mix of sales activity the way that average price is, suggest that prices are still accelerating across much of B.C., in and around the GTA and Montreal.
B.C. continues to see some of the strongest economic growth in the country, coupled with strong demographics. Home sales there have been drawing down inventories and boosting prices across the province.
In Alberta, home sales have gone from setting records in 2014 to running at or below their 10 year average, as uncertainty surrounding the outlook for oil prices and employment continues to side line potential home buyers.
In Ontario, the ongoing shortage of single family homes for sale in and around the GTA continues to drive very strong price gains. Record levels of activity in the province would likely be higher were it not for a shortage of low rise homes coming onto the market.
In Saskatchewan, Manitoba, Quebec, and most of Eastern Canada, supply remains elevated. Home prices outside of B.C. and Ontario are forecast to keep pace with or lag inflation, as elevated supplies are drawn down by sales and return to better balance.
The forecast for national sales in 2015 has been revised slightly higher, reflecting stronger than anticipated activity in B.C. and Ontario. National sales are now projected to rise by 3.3% to 495,800 units in 2015, marking the second strongest year on record for home sales in Canada.
Across the country, British Columbia is projected to post the largest annual increase in activity in 2015 with growth of 18.1. Alberta, Saskatchewan, and Nova Scotia are expected to post the largest annual sales declines 21.6%, 12% and 12.1% respectively while activity in Manitoba is forecast to rise by 2.2% this year.
Home sales in Ontario are projected to rise by 7.3% in 2015, while sales in Quebec are forecast to rise 4.6% compared to a sluggish 2014, the forecast report points out.
In Eastern Canada, where activity tends to be more volatile, sales in New Brunswick and Prince Edward Island have surprised on the high side in recent months, while sales in Nova Scotia have remained weaker than previously forecast.
Home sales in New Brunswick are now expected to post an annual increase of 5.1% in 2015. Activity in Prince Edward Island is set to rebound by 14.9% over 2014, when sales slowed to their lowest level in over a decade. Sales activity in Newfoundland and Labrador is projected to remain little changed with a slight rise of 0.5%.
The forecast for national average home price growth has been revised up slightly to $433,600 in 2015, representing an annual increase of 6.2%. The upward revision reflects average price gains in British Columbia and Ontario together with a projected increase in their proportion of national sales.
British Columbia is expected to be the only province where the average home price rises faster at 8.5% than the national average, while the rise in Ontario’s average price of 6% is forecast to be roughly in line with the national increase.
Average prices in 2015 among other provinces are projected to remain stable, with annual gains in Manitoba of 1.6%, Quebec at 1.4% and Nova Scotia up 2.9%. Declines are forecast in New Brunswick, Prince Edward Island and Newfoundland and Labrador at 2.7%, 0.9% and 0.4% respectively.
In 2016, national sales are forecast to number 495,000, which is little changed compared to forecast sales for 2015. Activity gains in Quebec and some improvement in Prairie provinces are expected to offset a slight cooling for activity in B.C. and Ontario, where affordability for single family home buyers is anticipated to become strained.
‘Elsewhere, strengthening economic prospects are expected to translate into slow and steady sales gains among provinces where home sales have struggled while prices remained more affordable due to an elevated supply of listings,’ the report says.
‘The exception is in Newfoundland and Labrador, where economic and demographic challenges are expected to persist in 2016,’ it adds.