Despite record-setting low temperatures and snow storms, housing market activity in Canada during the first quarter of 2014 showed year-over-year resilience in most regions, with some exceptions in Atlantic Canada, Manitoba and Ontario. In urban centres, house prices continued to post gains, in large part due to a lack of inventory; price increases were also seen in regions with strong local economies driven by the resource sector and major infrastructure development.
Potential homebuyers in Toronto and Calgary continue to be frustrated by low inventory and low affordability. In Toronto, where inventory has reached a record low, average residential sale prices increased almost 8 per cent year-over-year in March. Re/Max is predicting a similar increase throughout the remainder of 2014. In Calgary, where a typical home spent only 34 days on the market, inventory levels were 30 per cent below the threshold of a balanced market. House prices in the region increased by over 5 per cent compared to the same period last year. Vancouver’s balanced market posted a more modest year-over-year gain, but the average selling price of $1.36 million for a single family house has priced many buyers out of the market. Low affordability in this desirable city has prompted some innovative solutions, where we are seeing entire new lines of multipurpose furniture developed for 400 square foot studios that are selling in the $150,000 price range. Many potential first-time buyers in Calgary and Toronto have decided that purchasing a home is now more attractive given the reality of rising rents and a lack of rental selection. Both cities have extremely low vacancy rates with Toronto posting a rate below two per cent and Calgary’s renters struggling with a rate of one per cent. In both markets desirable rental properties are now attracting multiple offers, creating additional frustrations for those waiting to buy.
Harsh winter conditions and power outages delayed market activity across most of Canada, but were most notable in Atlantic Canada as well as parts of Southern Ontario. Looking ahead, spring sales in these regions are expected to make up for the lack of activity seen during the first two months of the year as new listings help satisfy pent-up buyer demand. For example, despite consumer confidence and a strong local economy, sales in St. John’s decreased 9 per cent year-over-year in February as they experienced one of the harshest winters on record. Southern Ontario also suffered from snow storms and power outages. In Windsor, which suffered its heaviest snowfall winter since 1908, total first quarter unit sales declined 15 per cent year-over-year. However, March showed signs of recovery as unit sales were only modestly down one per cent year-over-year. This scenario is being played out in many of the markets that experienced a difficult winter.
Natural resources will continue to play a crucial role in fueling the Canadian housing market in 2014, specifically in Calgary, Saskatoon and St. John’s. In New Brunswick, Saint John buyers are waiting on announcements about pipeline and oil refinery developments that could have a transformative impact on their market.
Foreign buyers looking for investment properties or second homes have been drawn to Canadian cities for a number of years due to close social and economic ties as well as confidence in Canadian real estate. More recently, a weakened Canadian dollar has created another incentive for those buyers to invest in Canada.
As the country shakes off the harsh winter, markets across Canada should see healthy activity through the remainder of 2014.