Sales data being released from last month continues to show varying degrees of market activity among Canadian cities, reinforcing the view that real estate is local.
Below is what BMO had to write about some key cities in their North American Outlook report out today.
After pausing for breath early this year, Calgary’s home sales jumped 8.3% y/y in April, lifting benchmark prices 7.1%. Calgary is one of the few markets likely to see further price gains this year, as valuations remain reasonable after falling sharply in 2008.
The sales downturn is also stabilizing in another major city with valuation challenges, Toronto. After falling 20% y/y in March, GTA resales fell a lesser 2.1% in April and remain near their average of the past decade. Benchmark prices are up 2.9% y/y to record highs.
Even in the over-supplied condo market, where new sales plunged 55% y/y in Q1 from high levels last year and unsold inventory is at record highs, benchmark resale prices have steadied (up 0.9% y/y in April).
A low condo rental vacancy rate is providing support. However, we still expect prices to soften in the year ahead, as a large number of units (nearly double from two years ago) are under construction.
Vancouver remains the weakest major market in the country because of poor affordability, the suspension of the federal Immigrant Investor Program, and tougher mortgage rules.
Each time the maximum amortization period on insured mortgages was scaled back(from 40 years in 2008 to 25 years now), monthly mortgage costs rose significantly, shrinking the pool of prospective buyers, especially in one of the priciest markets in the world.
However, even Vancouver’s downturn appears to be stabilizing, with sales falling 6.1% y/y in April versus -19% in March and -31% in 2012. While demand remains weak—sales are 21% below the 10-year average for the month—supply remains in check. The number of active listings is only slightly above year-ago levels and new listings are slowing, so sellers aren’t flooding the market. With a six-month supply of homes available for sale, the market is moving into balance after favouring buyers last year.
Accordingly, benchmark prices, though still down 3.9% y/y, are stabilizing (even in the priciest neighborhoods), rising 1.6% from the start of the year (2.1% for condos).
Still, we expect Vancouver’s prices to decline moderately further this year, as affordability remains poor.
Tougher mortgage rules, high household debt and reduced affordability in some regions have taken the wind out of the housing market’s sales, though most signs point to a soft rather than hard landing.
Existing home sales fell 15% y/y in March to around the average of the past decade, with April figures for a number of cities showing milder declines.
That’s not a bad outcome after a ten-year boom that took ownership rates to record highs and house prices up two-fold. Builders have responded to softer demand by slowing construction in line with household formations.
Benchmark prices rose 2.2% y/y in March (about half the year-ago pace) to record highs.
With balanced markets prevailing in most regions, prices are expected to stabilize this year.
You can download BMO`s North American Outlook here