Supply and demand issues – and the resulting price increases – in Vancouver and Toronto continue to skew the national real estate picture.
Thankfully, however, housing market conditions in the rest of the country are not fallowing suit.
“The shortage of homes available for sale has become more severe in some cities, particularly in and around Toronto and in parts of BC,” Gregory Klump, chief economist of the Canadian Real Estate Association (CREA), said in releasing the association’s statistics for January 2017. “Unless sales activity drops dramatically, the outlook for home prices remains strong in places that face a continuing supply shortage.”
National home sales were down slightly in January on a month-over-month basis, falling 1.3 per cent – putting them at the second lowest monthly level since the fall of 2015 and only slightly above levels recorded last November when recently tightened mortgage regulations came into effect.
Sales activity was down from the previous month in about half of all local markets, led by the GTA, Greater Vancouver and Montreal.
“Canadian homebuyers face some challenges this year, including new mortgage rules that make it harder to qualify for a mortgage and regulatory changes that will push up mortgage financing costs,” says CREA President Cliff Iverson. “It will take some time to gauge the extent to which these challenges will weigh on homebuyers in different housing markets across Canada.”
The number of newly listed homes dropped 6.7 per cent in January 2017, the second consecutive monthly decline. New listings were down in about two-thirds of all local markets, led by the GTA and environs across Vancouver Island.
The imbalance between limited housing supply and robust demand in Ontario’s Greater Golden Horseshoe region (the GTA, Hamilton-Burlington, Oakville-Milton, Guelph, Kitchener-Waterloo, Cambridge, Brantford, the Niagara Region, Barrie and nearby cottage country) is without precedent, CREA says.
The number of months of inventory in January 2017 stood at or below one month in the GTA, Hamilton-Burlington, Oakville-Milton, Kitchener-Waterloo, Cambridge, Brantford and Guelph.
While the conditions in Toronto and Vancouver are good for those who already own homes, they’re anything but for prospective homebuyers. Indeed, some sources say the shortage of supply in the GTA has reached “crisis” levels.
“By definition, something that can’t last forever, won’t,” Klump told YPNextHome. “Supply and demand for single-family homes will return to a more sustainable balance over time, reflecting fewer transactions as homebuyers are priced out of the market, and price stability rather than price gains.
“To qualify for home purchase financing under recently tightened mortgage regulations, first-time homebuyers have been forced to look further from the urban centres, where land prices are less expensive, or shop for a lower priced home.”
The Aggregate Composite MLS HPI rose by 15 per cent, year over year, in January 2017. This was up slightly from December’s gain, reflecting an acceleration in condo and townhome price increases.
Prices for two-storey single-family homes posted the strongest year-over-year gains (16.8 per cent), followed closely by townhouse/row units (15.8 per cent), one-storey single-family homes (14.4%) and condo units (13.3 per cent).
While benchmark home prices were up from year-ago levels in 10 of 13 housing markets tracked by the MLS HPI, price trends continued to vary widely by location.
In the Fraser Valley and Greater Vancouver, prices have receded from their peaks posted in August 2016. However, home prices in these regions nonetheless remain well above year-ago levels (24.9 and 15.6 per cent, respectively).
Meanwhile, benchmark prices continue to climb in Victoria and elsewhere on Vancouver Island together with Greater Toronto, Oakville-Milton and Guelph. Year-over-year price gains in these five markets ranged from about 18 to 26 per cent in January.
By comparison, home prices were down 2.9 per cent year-over-year in Calgary and by one per cent in Saskatoon. Prices in these two markets now stand 5.9 and 4.3 per cent below their respective peaks in 2015.
Home prices were up modestly from year-ago levels in Regina (3.8 per cent), Ottawa (3.7 per cent) and Montreal (3.1 per cent). In Greater Moncton, home prices for the market overall held steady (-0.2 per cent), reflecting an increase in townhouse row units prices (5.8 per cent) that was offset by a decline in prices for one-storey single-family homes (-1.0 per cent).
The national average price for homes sold in January 2017 was $470,253, up just 0.2 per cent from where it stood one year earlier.
The national average price continues to be pulled upward by sales in Vancouver and Toronto, two of Canada’s tightest, most active and expensive housing markets.
Vancouver’s share of national sales activity has diminished considerably over the past year, giving it less upward influence on the national average price. The average price is reduced by almost $120,000 to $351,998 if Vancouver and Toronto sales are excluded from calculations.