Canadian Housing Market Outlook for 2020

The Canadian housing market is expected to stabilize in 2019, particularly in Vancouver and Toronto, as we move into 2020. Healthy price increases are expected this year, with estimating a 3.7 per-cent increase in the average residential sale price.

Increased consumer confidence could be a key factor affecting the housing market in 2020. Most individual markets surveyed across Canada experienced moderate price increases year-over-year from 2018 to 2019. However, some regions in Ontario continue to experience higher-than-normal gains, including London (+10.7%), Windsor (+11%), Ottawa (+11.7%) and Niagara (+12.9%).

As more Canadians have adjusted to the mortgage stress test and older Millennials move into their peak earning years, it is anticipated that they will drive the market in 2020, particularly single Millennials and young couples. A recent Leger survey conducted by leading real estate franchises found that more than half (51%) of Canadians are considering buying a property in the next five years, especially those under the age of 45.

ONTARIO

Toronto is set to experience a strong housing market in 2020. Lower unemployment rates, economic growth and improved overall affordability in the Greater Toronto Area are expected to drive the market forward. The estimated average sale price increase for 2020 is six%, two points higher than the growth experienced between 2018 ($736,256) and 2019 ($766,236). The city saw 76,413 properties sold in 2019, up 12% from 2018 (68,064). While Toronto is experiencing its “busiest” construction season ever, the housing supply still falls short of the demands of the city’s rapidly growing population.

Cities such as Ottawa and Windsor are seller’s markets, showing substantial increases in average residential sale price at 11.7 and 11%, respectively. This strong growth is expected to continue into 2020, with Ottawa’s new LRT system impacting surrounding development and Windsor’s continued affordability attracting young professionals to the area. Buyers are also not burdened by the mortgage stress test, as they were in 2018.

The Niagara region is also showing strong growth, with average residential sale price increasing almost 13%, from $378,517 in 2018 to $427,487.50 in 2019. Value-conscious consumers from the Greater Toronto Area are buying in droves, with many choosing to live in the region while commuting to Toronto.

Southern Ontario is witnessing some incredibly strong price appreciation, with many regions still seeing double-digit gains. Thanks to the region’s resilient economy, staggering population growth and relentless development, the 2020 market looks very optimistic.

BRITISH COLUMBIA

Reduced foreign buyer activity has opened up more opportunities for local buyers in Greater Vancouver’s condo market. While average residential sale prices for all properties increased by two%, from $1,030,829 in 2017 to $1,049,362 in 2018, the number of sales dropped by 30%. The low absorption rate is expected to bring down average residential sale prices in 2019 by three%

Similarly, the number of sales year-over-year has dropped by 33% in Kelowna. Rising interest rates, government policy changes, and the mortgage stress test were all factors that contributed to the decline, which is expected to continue into 2019. Average residential sale prices increased by six% year-over-year from $674,930 in 2017 to $718,915 in 2018, with prices expected to decrease by three% in 2019.

The drop in sales in key markets across British Columbia can be partially attributed to Canadians’ increasing difficulty in getting an affordable mortgage in the region. The situation created by the introduction of the mortgage stress test this year, as well as continually increasing interest rates, means more Canadians will be priced out of the market.

THE PRAIRIES

Alberta continues to experience slowing economic conditions, which have contributed to a decrease in average residential sale prices in Calgary, from $478,088 in 2018 to $460,532 in 2019. Condos are the easiest way for first-time homebuyers to get into the market, with starter units going for as low as $150,000. While the city’s unemployment rate continues to remain high compared to the rest of Canada, the population is increasing, with more people moving to the city from other parts of the province.

On the other hand, Winnipeg has shown a small increase in the average residential sale price, both for freehold and condominium properties, by 1.5 and 0.8%, respectively. The number of properties sold also increased by 5%, from 8,139 in 2018 to 8,539 in 2019. Immigration to the city, in combination with reasonable prices and ample supply of inventory, is expected to drive sales going into 2020. Regina also saw the number of properties sold increased by more than 5% year-over-year, despite being one of the few markets where the effects of the mortgage stress test are still being felt.

ATLANTIC CANADA

In Atlantic Canada, Halifax and Saint John have experienced a solid price appreciation of six and five%, respectively. Affordability continues to attract many buyers in the region, most of whom are buying single-family homes. At the same time, the region’s multi-family and condo market is being driven by retirees. Conversely, the real estate market in St. John’s is expected to recover in 2020, with increased consumer confidence expected to bring about stabilization. However, the city’s aging population and high rate of outbound migration is expected to have an impact on housing market activity at some point.