MLS sales to gain 1.2% this year
OTTAWA – The Canadian Real Estate Association (CREA) has changed course since its last forecast and now believes home sales via its Multiple Listing Service (MLS) will increase by a slight 1.2% in 2019, thanks to several factors including increased incentives for first time buyers.
CREA’s previous forecast estimated a decline of 1.6% this year. However, the realtors’ group noted this will still leave annual sales below the 10-year average and well under the annual record set in 2016, when almost 540,000 homes traded hands.
It expects sales of 463,000 units this year, which they maintain that on a per capita basis, 2019 will remain effectively tied with 2018 as the resale housing market’s weakest year since 2001. Each unit sold is expected to generate between $6,000 and $6,500 in furniture and appliance sales over the first three years after closing.
In its announcement, CREA noted many of the economical fundamentals that support the housing market remain strong across the country, except in the Prairies and Newfoundland & Labrador. Population and employment growth have remained strong since it issued its last forecast in March and the unemployment rate has fallen further.
It also noted the Bank of Canada is not expected to raise interest rates over the balance of the year and the last federal budget introduced two measure that should strengthen the housing market: raising the maximum individual withdrawal under the Home Buyers’ Plan to $35,000 (from $25,000) and a First Time Homebuyer Incentive, where the government finances a portion of the home purchase in exchange for an equity share in the home’s value.
“These factors are expected to support to the beginnings of a recovery in home sales over the second half of 2019 after starting this year on a weak footing,” CREA said, adding, “Nonetheless, the overall level of sales is expected to remain well below where it was in recent years, as successive policy changes – most notably the implementation of the B-20 stress test – continue to limit access to mortgage financing and dampen housing market sentiment. This is particularly the case in pricier areas where younger buyers have had little choice but to borrow more to get into the market.”
British Columbia is the only province expected to weigh materially on the national market results this year, as its market will now fall 13.3% over 2018, which is slightly better than the previously forecast decline of 14.9%.
Other revisions from the previous forecast for sales in 2019 were also upward, with Alberta moving from a 5.6% decline to a 0.9% decline, and Ontario’s gain upgraded from 0.9% previously to 3.9%.
Quebec and New Brunswick are still forecast to see the biggest sales gains in percentage terms in 2019 (+7.7% and +10.6%, respectively), with both provinces on track to set new annual records. Sales in Saskatchewan and Newfoundland & Labrador are forecast to improve by almost 5%, albeit from the lowest levels in more than a decade recorded last year. Meanwhile, activity in Manitoba and Nova Scotia is forecast to rise between 3.5% and 4.5% to near-record annual levels.
The national average price is still projected to stabilise (-0.6%) at around $485,000 in 2019 following the 4.1% drop recorded in 2018, which was the largest in almost 25 years.
“This reflects a stark and growing split between Eastern and Western regions,” CREA said. “In line with the balance between supply and demand across the country, average prices are forecast to fall in 2019 in British Columbia, Alberta, Saskatchewan, and rise in Ontario, Quebec and the Maritimes. The average price is also expected to fall for the fifth consecutive year in Newfoundland & Labrador.”
Sales are forecast to continue improving in 2020 and are forecast to rise 4.4% to 483,200 units as interest rates remain near current levels and potential home buyers continue to adjust and adapt to recent policy changes.
Almost all provinces are forecast to see more sales in 2020 compared to 2019, with gains ranging from 1% to 6%.
“That said, the big picture is that sales are expected to remain historically weak in British Columbia, Alberta, Saskatchewan and Newfoundland and Labrador, historically strong in Quebec, New Brunswick, Manitoba and Nova Scotia, and come in close to the 10-year average in Ontario,” CREA believes.
The national average price is forecast to edge up by 0.9% to around $490,000 next year.
“Average price trends across Canada in 2020 are generally expected to be more moderate versions of those in 2019, with small declines in British Columbia, Alberta, Saskatchewan and Newfoundland & Labrador and modest gains in all provinces from Manitoba through the Maritimes,” the association said.