(CNW) — High demand and low supply continued to characterize Vancouver’s and Toronto’s housing markets throughout 2016 as competition from buyers for limited inventory of single-family homes pushed prices higher.
The average residential sale price increased 13 per cent in Greater Vancouver to approximately $1,020,300 and rose 17 per cent in the Greater Toronto Area (GTA) to an estimated $725,857, RE/MAX reported. Although demand remains high in both urban centres, limited inventory in the freehold market, the new 15 per cent foreign-buyer tax in Vancouver, and the recent tightening of mortgage rules by the federal government are expected to soften market activity in the short term.
In 2017, RE/MAX estimates average residential sale price will increase by 2 and 8 per cent in Greater Vancouver and the GTA respectively.
“RE/MAX expects the average home price in Canada to increase 2 per cent in 2017,” said Christopher Alexander, regional director, RE/MAX INTEGRA Ontario-Atlantic Canada Region. “Strong demand in Canada’s urban centres is expected to continue throughout next year and into the foreseeable future as almost half of Canadians plan to buy a home in the next five to 10 years, according to a recent RE/MAX survey.”
Regional markets in close proximity to Canada’s highest-price cities continued to experience steady interest from local move-up buyers and buyers from these cities (“move-over” buyers) who are looking to find a balance between affordability and square footage. This year, there were considerable year-over-year average price increases in Barrie (16 per cent), Hamilton-Burlington (20 per cent), Fraser Valley (20 per cent) and Kelowna (14 per cent).
Regulation changes at both the provincial and federal level towards the end of 2016 are already starting to impact activity in certain markets. The 15 per cent foreign buyer tax is expected to slow this trend somewhat, as price appreciation declines in Vancouver have resulted in some potential sellers staying in the Lower Mainland.
The ripple effect of the foreign buyer tax can also be felt in the upper end of the GTA and Montreal markets as some foreign investors are expected to look for properties in these regions rather than Vancouver.
Measures taken by the federal government to tighten mortgage insurance criteria for new homebuyers is expected to temper local first-time buyer activity across the country in the short term, but is not expected to have a long-term impact in most regions.
Homeownership remains a priority for Canadians, with 53 per cent of respondents in a recent RE/MAX survey conducted by Leger expressing intent to purchase a home and 47 per cent expressing intent to do so in the next five to 10 years.
Nearly one in three (30 per cent) Canadians plan to use the purchase of a home as an investment strategy to help fund their retirement, and 42 per cent of millennial respondents view it as a retirement funding strategy. A proportion of Canadians would also consider unconventional home financing options to realize their dream of ownership such as: purchasing a home with a family member (33 per cent); renting a room on a vacation rental site like Airbnb (15 per cent); renting out a room in their home (22 per cent); or even purchasing a home with a roommate (9 per cent).
The housing markets in Calgary and Edmonton remained relatively stable, with moderate declines in the number of sales and average residential sale price as a result of the prolonged recovery of the oil sector over the past two years. The average residential sale price in Edmonton decreased slightly, by 2 per cent year-over-year in 2016, while Calgary’s average residential sale price decreased by 4 per cent. Buyer activity is expected to pick up slightly in the second half of 2017 if employment opportunities in the oil sector continue to gradually come back to the province.
“The housing markets in Alberta’s two largest cities have remained resilient in 2016,” said Elton Ash, regional executive vice president, RE/MAX of Western Canada. “Low oil prices will continue to lead to tempered consumer confidence, but ongoing development projects in Edmonton and the recent approval of the Trans Mountain pipeline are expected to provide a boost to the provincial economy and help keep housing markets relatively stable in 2017.”
High inventory continues to be a factor in many regions including Regina, Montreal, Saint John and St. John’s, offering a good selection of product to first-time and move-up buyers in these cities. Local infrastructure projects and initiatives, such as preparations for Montreal’s 375th anniversary celebrations in 2017, are anticipated to provide a boost to these economies and their real estate markets next year.
The RE/MAX 2017 average residential sale price expectation for Canada is an increase of 2 per cent as Canadians continue to see homeownership as an important milestone as well as a good investment.
For the full 2017 RE/MAX Housing Market Outlook report, click here.
For more information about RE/MAX, to search home listings or find an agent in your community, please visit remax.ca.