Buy a house. Don’t buy a house. Soft landing. Crash landing. As we start the new year, the question on everyone’s mind is: What can we expect from Canada’s housing market?

Once again, experts agree that housing affordability is stretched, historically low interest rates will rise, and housing prices will drop. Rewind 365 days and you could be reading a forecast for 2014. But this time the experts agree: prices really will fall and it’s got everything to do with the recovery of the global economy.

Now, if the global economy were a ballgame we wouldn’t be in the World Series. Oil prices are depressed and Europe is still struggling with its credit crunch. But things are slowly improving in the U.S. and within Canada, and the important teams are still in the game: our employment rate is stable, oil prices are not (yet) low enough to cause real concern, and exports have picked up as the value of our dollar has dropped. All this leads most economists to believe we’ll see slightly higher bond and mortgage rates and a nation-wide cooling of the housing market over the next couple of years.

Robert Hogue, senior economist with RBC Bank, says he believes the coming year will be “a moderating phase for the market with a soft landing in 2016.” Hogue predicts national home prices will actually rise 1% or maybe 1.5% in 2015, as buyers race to get in the market before mortgage rates increase, after which prices will fall later in the year. “It’s one of the reasons why 2014 was such a strong year.”

But he cautions home owners: “Canada’s real estate market really is a multi-headed beast. It’s essentially very strong in Toronto, Vancouver and Calgary, but it’s balanced or soft in the majority of other markets.” As such, he predicts we’ll see a cooling of the three biggest markets by the end of the year in response to small mortgage rate hikes starting mid-year.

Now, if the prime rate were to climb from its current 3% level to 5% or 6% over the next year or two, many Canadians could find themselves in deep trouble, says Hogue. But he isn’t sure we’ll see rates shooting up that fast any time soon. Until recently, analysts and policy makers considered 5% to be the neutral or natural interest rate. It was the rate that allowed full employment, a stable inflation rate, and a sustainable growing economy. But Hogue, along with economists from Morgan Stanley and analysts from the C.D. Howe Institute, believe that the “new neutral rate” has actually dropped.

The primary reason is the impact baby boomers continue to have on the national economy. As boomers continue to age and leave the workforce, Canada can expect a slowing of the labour market, which will depress productivity growth, limit the economy, and suppress potential inflation, explains Hogue. “If the new normal is markedly below what we’re used to, then we won’t see as much downward pressure on housing prices,” he says.

The impact of demographics doesn’t stop there. According to a new report by Benjamin Tal, deputy chief economist with CIBC, analysts have been seriously underestimating the number of new immigrants in Canada. New immigrants account for 70% of the country’s population growth and about half are between the ages of 25 and 44—the key demographic that leads to household formations. According to Tal the under-estimated increase in the number of home-buying immigrants in Canada will help to offset a slowing economy, created by the boomer generation. “Immigration, itself, won’t be able to change this trajectory, but it will help to offset it,” explains Tal.

But David Madani from Capital Economics isn’t convinced. “Every good economist knows that immigration always fluctuates and it’s never prevented a housing cycle in the past.” He’s also not convinced that builders are out of the weeds when it comes to supply and demand. While he agrees that absorption rates are close to historical long-term averages, he’s confident that the market will suffer. “There are too many one-bedroom condo units being built when demand shows a need for family accommodation.”

So what’s a regular home buyer to do? The best advice is prepare for the worst, but if you’re ready to jump in and you can afford it, waiting for prices to fall might not be the best idea. Ted Rechtshaffen, president and CEO at TriDelta Financial, advises against trying to time the market in general. “It’s not about prices or the mortgage rate, it’s whether you can truly afford to own the home.” This means calculating whether or not you could still afford your monthly payments even if mortgage rates increased to 4% or 5% a few years from now. It also means deciding whether or not you can stomach a housing price drop. While many economists are predicting a 10% drop, the correction could be as great as 30% in some Canadian markets.

Of course, your home is more then equity and capital. It’s the place you spend time with friends and family, and the place you build memories. “Life and lifestyle is just as important,” says Rechtshaffen, so as long as you can afford your payments, “don’t be too concerned about the correction.”

Source: Romana King, MoneySense

There were no double-digit price gains in the country’s hottest real estate markets this year. Instead, Calgary, Toronto and Vancouver saw prices increase between 5% and 7%, according to each city’s real estate board.

And as Sal Guatieri predicted, interest rates held steady.

But that will change in 2015, says the senior economist at BMO Capital Markets. Rates will go up, but slowly.

“We don’t expect the Bank of Canada to begin raising rates until October 2015,” says Guatieri. “The overnight lending rate, currently at 1%, likely won’t reach a more neutral level of 3.3% for another three years. Longer-term mortgage rates will also rise gradually.”

As a result, home prices and sales will stabilize next year. “The ‘Hot 3 cities’ should see much slower price appreciation next year, while most other regions will see modest price gains,” he says, adding Toronto and Vancouver could even see prices decline in the next three years.

Nationally, the average home will cost $404,800 by year-end. That figure will rise to $410,600 in 2015, and $417,300 in 2016, notes MLS.

Meanwhile, about 189,500 housing starts are expected, according to CMHC. This is in line with 2014, which should see 189,000 units by year-end.

“[There will be] a slight moderation in multi-unit starts during 2015, which will be offset by an increase in single-detached starts,” says Bob Dugan, chief economist for CMHC. “Looking ahead to 2016, expectations are for total starts to moderate, as builders focus on reducing their inventories.”

So where’s the opportunity for real estate investors?

Guatieri warns about investing in detached property in Vancouver or Toronto, “as lofty valuations suggest the returns will be low and prices are at risk of falling when interest rates rise.” Condos and townhouses will offer better value.

Also, keep an eye on demographics and economic activity. “Housing markets are much weaker in eastern Canada due to [slower growth], older populations and weaker economies than in Ontario and western Canada. Cities such as Calgary [and] Montreal, which attract a relatively larger share of the one-quarter million international migrants to Canada will see stronger housing markets.”

Regional breakdown

Toronto

Sales are expected to increase, before moderating in 2016, notes Dana Senagama, CMHC’s senior market analyst for the Greater Toronto Area.

“An increasing desire among millennial and baby boomer populations to live an urban life will also fuel higher demand for condominium apartments over the next two years,” she says.

Guatieri adds steady buying from immigrants and echo boomers will support the market, cushioning any price declines.

Montreal

Montreal will see support from international migrants, says Guatieri, so there’ll be “steady sales activity and modestly rising prices in coming years.”

Kevin Hughes, CMHC regional economist for Quebec, adds, “A gradual pick up in Quebec’s economic growth over the next two years will provide some stimulus to housing demand. During this period, resale markets will tighten somewhat, which will help sustain housing starts. However, despite an edging up of demand, the expected supply levels will keep price growth below the 2% mark.”

Calgary

The market should remain healthy, predicts Guatieri, but will see slower sales and price appreciation. That’s due to the recent decline in oil prices, which will likely dampen investment in the energy sector and slow job growth. “We expect oil prices to firm next year, but an unexpected further decline would undercut Calgary’s housing market more severely.”

Meanwhile, the province saw regional price gains of 4.7% this year to $399,000, notes CMHC. The average price will continue to rise, but at a slower pace to $407,800 in 2015, and $417,500 in 2016.

Vancouver

“Housing demand will be supported by employment and population growth, but tempered by gradually rising mortgage interest rates,” says Carol Frketich, CMHC’s B.C. regional economist.

In B.C., existing MLS home sales are forecast to total 79,200 units in 2015, and 79,300 units in 2016. The average home price is forecast at $566,300 in 2015, and $573,000 in 2016.

Source: Suzanne Sharma, Advisor.ca

Housing prices in the Lower Mainland are predicted to rise a modest three per cent in 2015, while Canada’s highest prices, in Vancouver, will be sustained by demand from Mainland Chinese buyers.

That’s the view from RE/MAX’s 2015 national housing outlook, in a relatively optimistic report that suggests Greater Vancouver real estate is well supported by a variety of supply and demand factors.

RE/MAX’s report diverges strongly from a new Bank of Canada report that warns parts of Canada’s housing market are overvalued by 30 per cent.

RE/MAX’s report says average residential prices in Greater Vancouver increased from $781,517 in 2013 to $838,400, and are projected to rise to $863,600 in 2015.
Price gains in Vancouver will continue to be driven by hot demand and limited supply for detached homes in west-side neighbourhoods, RE/MAX predicts, while buyers who hoped to break into Vancouver’s market on the east side and lost multiple bid battles may drop out of the market in 2015.

Frustrated buyers won’t limit the market, though, because “the pipeline of demand for the region will continue to grow,” according to RE/MAX.

“Offshore buyer demand from Mainland China continued throughout the year,” the report says. “Demand for westside homes will continue to be driven by offshore buyers who can afford to pay the two million dollar-plus price tag.”

Cory Raven, managing broker at RE/MAX Select Realty in Vancouver, say agents report that “the mindset” of Mainland Chinese buyers focuses on “parking wealth” in Vancouver, rather than seeking price appreciation. That means a significant group of buyers in Vancouver is content to buy higher and higher, agents believe.

“Assuming that tap stays open, the higher end of the market will (continue to see aggressive gains),” Raven says.

There has been speculation that the flood of cash pouring from China into Vancouver real estate will be limited with the ending this year of a federal immigrant investor program. The South China Morning Post has reported a replacement program will be much smaller in scope, and will subject applicants to rigorous audits. But Raven says the perception among realtors is “the tap” will stay open.

“Many realtors have told me that the way business is done (in China) is very different, and the wealthy can always find a way to get their money out.”

Meanwhile, in a new report, the Bank of Canada studied worrying debt loads carried by homeowners across Canada, and calculated that some markets are at risk of correction, with homes overvalued by up to 30 per cent.

But Helmut Pastrick, chief economist of Central 1 credit union, says he believes the Bank of Canada’s data and study method is “constrained” and does not account for unique supply and demand factors in Vancouver’s housing market.

Pastrick says limited land supply in Vancouver is the main factor justifying high housing prices, and demand from Chinese buyers impacts Vancouver’s west side, and West Vancouver. But even if the flow of investment from offshore were to end, according to Pastrick, there would not be a significant drop in Greater Vancouver home prices.

Pastrick says he sees RE/MAX’s prediction of a three-per-cent rise in home prices across the region as reasonable.

“This market is not booming, but it is pretty solid,” he said. “It certainly is not a bubble.”

Pastrick says while U.S. officials appear ready to raise historically low interest rates within half a year, the Bank of Canada probably will not raise rates until late 2015 or longer.

While the Bank of Canada warns that high home prices and heavily indebted households raise risks of a housing correction, Pastrick believes the only real risk is an economic recession.

A drastic fall in oil prices that caught almost all economists by surprise will impact Alberta and other areas of Canada, but actually could support provincial economies such as B.C. that are net importers of oil, Pastrick believes. At this point, he sees no recession risk for B.C. on the horizon.

Source: Sam Cooper, The Province

A low inventory of single-family detached homes for sale in Metro Vancouver has buyers engaging in multiple bidding wars or camping out to get a shot at the few homes when they come on the market.

The demand is so high that many buyers are paying more than the original asking price and, in some cases, aren’t bothering with inspections or subjects on the property before signing on the dotted line, said Cory Raven, managing partner at ReMax Select Realty.

This is because they’re afraid someone else will beat them to the punch if they wait or take their time, he said.

“It’s very typical for someone to enter the market once, twice or three times expecting to buy a house and going into the bidding war and losing.” Raven said.

“It really has changed the dynamic of the good old days when you see a place, put in an offer and wait a couple of weeks … people are going into a 40-year-old house with no inspections.”

Such tactics are not surprising in the most expensive region in Canada for residential real estate in 2014. The average residential sale price for a single-family home in Metro Vancouver this year was about $838,400, up from $781,517 a year earlier, according to the ReMax 2015 housing market outlook.

And the situation isn’t expected to improve much for buyers looking for deals in 2015, with home prices forecast to rise by at least three per cent across Metro Vancouver — similar to what was experienced this year. Healthy gains are also anticipated in Kelowna, which is expected to see a seven-per-cent increase, and Victoria, slated for a four-per-cent rise in house prices.

The market is so hot that sales of single-family houses are still being listed across Metro Vancouver into mid-December, when they would have usually stopped by now before resuming in the new year, said Brian Lamb, of Royal LePage Realty Coquitlam.

“It’s bizarre,” Lamb said. “It can only go up in the first quarter of 2015. I think we’re going to have an incredible first half.”

The ReMax report suggests young families and older homeowners wishing to downsize are expected to drive demand, while interest from Mainland China also continues to influence the Greater Vancouver market.

“The supply side has definitely been affected,” Raven said. “A lot of people who are housing rich don’t know what to do with the equity except to keep it.”

David Lamb, of Sutton Group West Coast Realty, agreed many older people are hanging on to their homes, which is having an impact on inventory. He recently had eight offers on a home in Windsor Park on the North Shore, while a property east of Seymour raked in $40,000 more than the asking price, which was round the mid-$800,000s.

“Earlier this year we had a guy who lost out four times and finally found a house,” David Lamb said. “It’s emotional, it’s tough. When there’s a lot of competition, there’s always somebody who will pay more.”

It’s not just older homes that are facing the crunch. Lamb said foreign investors are willing to pay more for a home in Metro Vancouver, particularly in the Tri-Cities and Burnaby, where they tend to knock down existing homes to build their own.

He cited the Rivers Run development as an example of foreign investment interests: in the first two phases 24 homes sold within hours, while the remaining 14 homes were snagged within an hour by buyers who camped overnight to get them.

ReMax expects there will be upward pressure on detached house prices in Vancouver’s west side due to high demand and low inventory, but said the condo and townhouse markets will likely sustain a more balanced market.

However, even those markets aren’t immune from buyers’ frenzy. ReMax realtor Mary Cleaver said a four-bedroom townhouse listed on Vancouver’s Carolina Street had seven offers and was sold within the week, with no subjects and at $50,000 more than the asking price. “It is unique for that to happen,” she said.

Condos in East Vancouver were in high demand near the end of 2014, according to the report, which suggested well-priced homes often sold within one to two weeks, whereas the average market time for condos was 45 days. “The condo market has been healthy but nowhere near the bidding wars and housing (price) gains,” Raven said.

But both Lamb and Raven said some people are starting to get buyers’ fatigue and bowing out of the bidding wars. Two Sundays ago, Lamb said, 28 people had come through an open house, but several parties decided not to bother in the bidding. “We had people who won’t get tied up in this flurry,” he said.

However, ReMax noted as those potential buyers move to the sidelines and wait for the market to stabilize, the demand in the region will continue to grow.

Source: Kelly Sinoski, Vancouver Sun

After 18 months on the job, Bank of Canada governor Stephen Poloz has yet to wield the primary tool at his disposal: the key interest rate.

When Poloz took the bank’s reins in June 2013, he inherited an overnight rate set nearly three years earlier by his predecessor Mark Carney. That rate has yet to budge from one per cent, idling for one of the longest stretches in Bank of Canada history.

Bill Robson, the president of the C.D. Howe Institute think-tank, believes it will happen sometime in 2015 thanks to an increasingly positive economic outlook, including an improving U.S. economy and a pickup in Canadian exports.

Once the bank’s overnight rate starts to creep up, Canadian businesses will see their borrowing rates rise as will consumers who take out car loans and mortgages.

Ian Lee, a professor at the Sprott School of Business at Ottawa’s Carleton University, predicts businesses will feel the sting of higher rates right away, but he expects the effect on households to be much more muted.

Many consumers, he added, will avoid a sudden jolt because of fixed-rate loans and mortgages.

On top of that, Lee said the rate would likely inch up a quarter-percentage point at a time, making the coming increases easier to manage than the towering Canadian levels of the early 1980s.

Lee said the rate hikes in the early 80s killed the real-estate market, but didn’t create a housing meltdown and the number of foreclosures barely increased.

On the flip side, higher rates would help pension funds reap a bigger return on their investments, Lee added.

McGill University economics professor Christopher Ragan said, fundamentally, rising rates are a good thing.

“It is signalling a stronger economy,” he said.

The Bank of Canada said last week the country had showed signs of a “broadening recovery” and the output gap appeared to be smaller than it had projected just six weeks earlier. The output gap represents the divide between where the economy stands at a given time and where it would be when performing at its full potential.

However, the bank’s statement offset the positives by pointing to potential threats: weakening oil prices that drive down inflation and the significant risks of high household debt accumulated during years of low borrowing rates.

The basic logic behind low rates is to encourage people to gather debt when the economy is weak, said Ragan, who has worked at the Bank of Canada.

Robson belongs to the camp that expects Canada’s strengthening economy to force Poloz to move the rate in the middle of 2015, while Lee predicts the rapidly shrinking output gap will spur an increase as early as this spring.

The Organization for Economic Co-operation and Development recently predicted the Bank of Canada would start pushing the rate up in late May due to advancing inflation, a key driver of interest rates.

At the other end of the spectrum, economists like David Madani of Capital Economics expect Poloz to stand pat for a while, even after the U.S. Federal Reserve starts hiking its own key rate.

He predicts the forces pushing Canadian inflation upwards to remain fairly subdued in 2015, which he says will keep the central bank in a “holding pattern” for the whole year.

Robson said it would even be OK if Poloz raised rates and then edged them back down, if necessary.

“Everybody knows that the central bank has trouble reading the economy just as everyone else does,” he said.

Source: Andy Blatchford, The Canadian Press

One measure which suggests that housing demand is relatively strong heading into 2015 is the number-of-months’ supply of homes for sale in Canada, which declined from 5.9 to 5.8 in October, its lowest level since April of 2012.

Also, year-over-year house prices in the Teranet/National Bank House Price Index (+5.4% Oct) and the Canadian Real Estate Assn House Price Index (+5.5% Oct) have trended gradually higher since the beginning of 2014. However, the rates of increase in both indexes early in the final quarter of 2014 are nowhere near the levels they reached in 2006 of 14.1%, and 13.0% respectively and early in 2010 (12.7% and 12.5%).

Turning to the supply of dwellings, housing starts in Canada have remained quite stable. Indeed, over the past two years, starts have averaged 190,000 units seasonally adjusted at annual rates (SAAR) which is at or very close to the estimated rate of household formation. Further, despite the steady uptrend in existing home sales and the above noted gradual increase in house prices, housing starts trended lower since mid year.

Another indicator of housing market health is the percentage of mortgages that are more than ninety days in arrears. In line with the very gradual decline in the number of regular Employment Insurance beneficiaries and the unemployment rate since the beginning of the year, the percentage of mortgages more than ninety days in arrears has trended down from 0.32% in January to 0.29% in August, its lowest value since September of 2007.

Further according to the most recent Annual State of the Residential Mortgage Market in Canada published by the Canadian Assn of Accredited Mortgage Professionals, approximately 77% of the 1.35 million homeowners who renewed their mortgates in 2014 saw a 0.8% drop in their mortgage rate. This decline in mortage rates over the past year suggests that the majority of mortgage holders renewing over the next twelve months will also see a reduction in rates.

Looking forward, the fundamental drivers of housing demand in Canada appear more positive now than they have been for several quarters. First, over the past two months, Canada has added 117,000 jobs, the vast majority of which (96,000) are full time. Second, according to a recent study by CIBC, immigration has made a much stronger contribution to growth of Canada’s prime 25-44 age group than was previously estimated. Indeed, over the past five years, growth of this age group, the major driver of employment and household formation, has accelerated from -0.8% y/y in 2009 to +1.1% in 2014.

This rate is well above the average growth of the OECD and 75% faster than in the United States. Third, in addition to giving a boost to consumer spending, lower energy prices should, by increasing discretionary income, make home ownership more affordable. Finally, interest rates are likely to remain low well into the middle of the year and while they may edge higher in the second half of 2015, they are unlikely to chill housing demand significantly. Given these positive fundamentals, we expect housing starts to total in the range of 185,000 to 195,000 in 2015 compared to an estimated 190,000 in 2014.

Source: John Clinkard, Daily Commercial News

Even though real estate prices have been rising faster than inflation and are going through the roof in some parts of Canada, home ownership actually became more affordable in the third quarter, according to a quarterly survey by RBC Economics.

The bank credits rising household incomes, low interest rates and lower utility costs in some markets for making it a bit easier to own a home.

During the July-to-September period, RBC’s housing affordability measure at the national level fell 0.2 percentage points to 47.8 per cent for two-storey homes. It also fell for condos – down 0.3 percentage points to 27.1 per cent.

“A trend that jumped out in the latest data was a further broad improvement in affordability of condos where a strong majority of markets across Canada saw the measure for the segment fall,” said RBC chief economist Craig Wright in a release.

“Condos no doubt continue to be the more affordable ownership option in every market.”

The affordability measure for detached bungalows was the outlier; it rose a tenth of a percentage point to 42.6 per cent.

An affordability reading of 50 means that ownership costs, which include mortgage costs, property taxes and utility costs, would require 50 per cent of a household’s monthly gross income.

The latest data from the Canadian Real Estate Association shows that the national average home resale price rose 7.1 per cent on a year-over-year basis in October.

The MLS home price index, which many observers consider a better indicator of home price trends, rose 5.5 per cent over the same period.

Some markets, notably Vancouver, Toronto and Calgary, have seen real estate prices rise much faster than the national average. The bank notes that it is the robust activity in these three markets that has been largely responsible for eight monthly increases in resales in the last nine months.

Affordability remains a big stretch in Vancouver and Toronto. The cost of a benchmark detached bungalow in Vancouver, for instance, requires 83.6 per cent of a typical household’s pretax income to carry. In Toronto, it takes 56.3 per cent.

RBC says a drop in fixed mortgage rates earlier this year helped to drive the current strength in the housing market. But it doesn’t expect that situation to last.

“A combination of gradually increasing interest rates and higher prices will likely reverse the improvement in housing affordability that took place in the past year and weigh more and more heavily on homebuyer demand in Canada,” said Wright.

“We expect the next stage of the housing cycle to be a transition toward lower resales and slower price increases.”

RBC said it expects the Bank of Canada to raise its key overnight lending rates in the middle of next year, but says longer-term rates will rise “well before that.”

Source: CBC News

Rumours of the great Canadian housing bubble are greatly exaggerated, says Greg Klump, chief economist for the Canadian Real Estate Association (CREA).

While Canadian housing prices have increased an average 6.9 per cent so far this year (the highest in a decade), the more accurate housing price index (HPI) has increased 5.2 per cent for the first 10 months of 2014, which is the best in three years, according to CREA.

Moreover, if you take Toronto, Vancouver and to a lesser extent Calgary out of the picture, the average price increase would be several percentage points lower, while other market measures, like sales-to-listings ratios and month’s supply of homes for sale, are close to their 10-year averages.

“The problem with housing market bubble stories is that they fail to recognize fundamental housing market dynamics,” Klump told the Association of Regina Realtors in Regina Thursday. “For a big price correction to take place, we need a big and lasting run up in supply … or a big and lasting drop in demand … or some combination of the two.”

Since neither a recession (which would result in massive layoffs) nor a big spike in interest rates (which would drive up debt-servicing costs) is on the horizon, Klump said: “I just don’t see that happening.”

Still even reputable agencies like Canada Mortgage and Housing Corp have expressed concern about Canadian housing prices, which have continued to outstrip U.S. home prices in 2013, even when inflation and exchange rates are taken into account. “This Canadian ‘premium’ could be cause for concern because it may indicate that house prices in Canada are overvalued,” CMHC said in its annual Canadian Housing Observer released Thursday.

Following his presentation, Klump said CMHC’s concern is that “average house price growth is being stretched” by increasing average prices in two of Canada’s most active markets, Vancouver and Toronto.

“What’s going on in Vancouver and Toronto reflects a couple of things,” Klump said. “No. 1, you’ve got some very high-priced homes making up a greater proportion of the sales, pulling up the average price in those markets and for Canada as well.”

For example, Toronto saw a nine per cent year-overyear increase in average home prices in October, versus the 5.5 per cent increase in HPI nationally.

In addition, those price increases are largely in the central Toronto area, where “densification” initiatives (i.e., condo construction) have driven up the price of single-detached homes.

“It’s a function of the market because you don’t have enough supply to catch up with the demand,” Klump said.

“In Vancouver, you’re capped by geography. There’s no place to go. So there’s a lot of expensive homes being sold and an ongoing shortage of affordable homes.”

Source: Bruce Johnstone, The StarPhoenix

The national average home price rose in October but the impact of Canada’s two largest markets is continuing to influence Canada-wide numbers, according to the Canadian Real Estate Association.

Across the countries prices were up 7.1% from a year ago to an average of $419,699. Once Toronto and Vancouver are removed, the annual gain slips to 5.4% and the average sale price for October drops to $330,596.

“Low interest rates continued to support sales in some of Canada’s more active and expensive urban housing markets and factored into the monthly increase for national sales,” said Beth Crosbie., president of CREA, in a statement. “Even so, sales did not increase in many local markets in Canada, which shows that national and local housing market trends can be very different.”

For the sixth straight month sales rose and last month proved to be the strongest for October since 2009.

“While the strength of national sales activity is far from being a Canada-wide phenomenon, it extends beyond Vancouver, Calgary and Toronto,” said Gregory Klump, chief economist with CREA. “Sales in a number of B.C. markets have started to recover from weaker demand over the past couple of years. They have also been improving across much of Alberta, where interprovincial migration and international immigration are reaching new heights.”

Actual October sales were up 7% from a year and sales were up 70% of all local markets, led by Greater Vancouver and the Fraser Valley, Victoria, Calgary, and Greater Toronto. Those five markets combined for 40% of the national sales activity.

For the first 10 months of the year, sales were now up 5.2% from a year ago and 2.5% above the 10-year average for the same period.

Source: Garry Marr, Financial Post

Housing prices in the Vancouver region are headed for a record high this year, and signs point to a continuing upward trend in Canada’s most expensive property market, fuelled by steady population growth and economic stability.

The price for detached houses, condos and townhouses sold in Greater Vancouver is on track to average $811,000 this year, up 5.6 per cent from $767,765 in 2013, according to Canada Mortgage and Housing Corp.

CMHC predicts that average prices for resale properties will rise 1.2 per cent to $821,000 in 2015 and climb another 1.7 per cent to $835,000 in 2016.

Sales on the Multiple Listing Service will jump 13.2 per cent to 32,800 this year, before slipping to 32,250 units in 2015 and 31,600 in 2016, the agency said in its market outlook for Greater Vancouver. The forecasts are above the 15-year average of nearly 31,300 sales annually.

“Looking ahead, existing home sales are projected to ride the 2014 momentum into much of 2015 before anticipated higher interest rates take some steam away towards the latter part of 2015,” CMHC said, adding that population growth in Greater Vancouver is largely driven by migration from overseas.

Net migration is forecast to grow 11 per cent to 26,500 arrivals in the Vancouver area this year, followed by a 7.5-per-cent gain to another 28,500 people in 2015.

“A strengthening economy should help full-time employment gain more traction for all age groups,” CMHC said. “Employment and population changes are two of the key drivers behind housing demand.”

The average price for a detached house in the Vancouver region is forecast by CMHC to climb 4.8 per cent to $1.51-million next year. A May story in the New Yorker magazine on Vancouver’s pricey houses asserted that the B.C. city has become part of a global market in real estate, even though it “doesn’t have the cultural cachet of Paris or Milan.”

An October report titled Emerging Trends in Real Estate echoed the magazine’s assessment. The study by PricewaterhouseCoopers and the Urban Land Institute noted that while Vancouver has a lower global profile than those two major European cities, real estate on Canada’s West Coast is seen as a hedge against political risk during turbulent times in other parts of the world. Vancouver “does offer comfort and stability – and a place for the world’s super-rich to park sizable funds in local real estate as a hedge against risk,” said the report.

As for new home construction, housing starts in the Vancouver region are on pace to rise 1.1 per cent to 18,900 units this year, slip to 18,700 next year and then increase to 19,250 in 2016, according to the CMHC forecast. The overall trend is stable, said Robyn Adamache, the agency’s senior market analyst for Vancouver.

CMHC’s outlook covers Vancouver suburbs such as Richmond and Burnaby. The agency’s other research includes tracking Fraser Valley communities, from sprawling Surrey to Abbotsford.

Average prices for existing Fraser Valley properties are expected to increase 4 per cent this year to $510,000, then rise 0.5 per cent to $512,500 next year and gain another 2.2 per cent to $524,000 in 2016.

CMHC is calling for 14,500 resale houses changing hands this year in the Fraser Valley, up 12.4 per cent from 2013. That will be followed by 13,500 sales in 2015 and 13,750 in 2016, the agency said.

The forecasts would be thrown off if interest rates were to soar, resulting in a housing slump nationally, but industry experts aren’t expecting sharp rate increases.

Source: Brent Jang, Globe and Mail