2013 proved an unusually complex year for residential real estate in Canada, characterized by two very separate and distinct homebuying markets. Housing sales fell seriously short of year-ago levels in the first and second quarter of 2013. Edmonton, Calgary, Kitchener-Waterloo, and Windsor-Essex were the only markets to buck the trend, with home sales up moderately during the six month period. July, however, marked a turning point for the market overall, with an upswing in sales activity reported virtually across the board, led by significant increases in both Greater Toronto and Greater Vancouver.
The trend continued throughout the latter half of the year, bringing most markets in line, and several well ahead of 2012 levels, by year-end 2013. Several factors contributed to the abrupt turnaround in the Canadian housing market. Low interest rates were the catalyst for many purchasers, with the threat of higher rates down the road prompting those sitting on the fence to make their moves, particularly given the slight uptick in August.
A stronger-than-expected economic picture emerged in the first quarter of the year, with GDP growth reported at 2.2 per cent. While performance tapered in the second quarter, and jumped yet again in the third, consumers came to accept slow but steady economic growth as the new norm. Confidence levels remained relatively healthy as a result, further buoyed by rising employment and job security. Inventory, while balanced throughout much of the year, continued to tighten in key markets. Entry-level price points were most affected, given the influx of first time buyers in the latter half of the year. Move-up buyers remained a major force in 2013, fuelling sales at mid-toupper- level price points. Affordability concerns overshadowed activity in some markets, given average prices on yet another record-breaking trajectory. New peaks were realized in almost every market in 2013 (with the exception of British Columbia’s Vancouver, Victoria, and Kelowna).
Nationally, average price is forecast to appreciate four per cent to $380,000 in 2013, up from $363,740 one year earlier. The greatest percentage increases are expected in Hamilton-
Burlington (+7.5%), Barrie and District (+7%), St. John’s (+6%), Calgary (+6%), Greater Vancouver (+5%), Winnipeg (+5%) and the Greater Toronto Area (+5%). The number of homes sold in Canada by year end is expected to climb three per cent to 466,000 units, up from 453,372 units in 2012. Major centres projected to lead the country in terms of sales appreciation include Greater Vancouver (+10%), Kelowna (+10%), Victoria (+6%), Windsor-Essex (+6%), Hamilton-Burlington (+5%) and Edmonton (+5%).
Despite its moderate growth pattern, Canada is expected to be the second top-performing economy of the G7 countries in 2014—surpassed only by the U.S. (with a GDP growth rate of 2.8 per cent). Increased business investment, low capital costs and improving confidence levels should bolster the country’s GDP growth rate to about 2.3 percent next year, although it could move higher given the impact of strengthening global economies on the Canadian manufacturing sector. As employment opportunities increase, unemployment levels are projected to trend further downward, settling at 6.9 per cent in 2014. Immigration is expected to continue at a steady pace in the coming years, with the government welcoming between 250,000 and 265,000 new residents annually. Alberta is expected to lead the country in terms of economic growth in 2014 with a GDP growth level of 4.1 per cent, followed by Ontario at 2.8 per cent, British Columbia at 2.7 per cent, Saskatchewan at 2.7 per cent, Manitoba at 2.6 per cent and Nova Scotia at 2.3 per cent.
With an improved economic picture in sight, the overall outlook for the country’s residential real estate market is exceptionally healthy. Nationally, home sales are expected to climb another two per cent to 475,000 units while the value of an average Canadian home is forecast to escalate another three per cent to $390,000. Inventory is expected to remain in clear balanced territory throughout 2014, although some pockets and price points may see continued shortages. While the move-up segment will play a significant role in the market moving forward, fuelling home buying activity across all price points and housing types, first-time buyers will be equally active in 2014. Condominiums will continue to be a popular choice with younger purchasers, as well as empty nesters and retirees in the year ahead. Vertical growth is expected to occur with greater frequency in the future as major centres place increased emphasis on high-density living, particularly in the urban core.