The RE/MAX Housing Market Outlook 2011, examining trends and developments in 26 cities across the country, found that home-buying activity in 2010 fell short of 2009 levels. This was the case in Montréal and Québec City, where sales fell by two and three per cent respectively. Housing values, however, continued to climb, with virtually all areas reporting an upswing in average price, ranging from just under one per cent to 15 per cent this year. Québec City was among the markets that posted double-digit gains in price at 15 per cent, while Montréal reported a solid seven per cent increase. Lower inventory levels in many markets offset the effects of diminished demand, propping-up price in almost every instance. Kitchener-Waterloo and St. John's tied Québec City for the greatest increases in average price this year, while Eastern Canadian markets including Hamilton-Burlington, Sudbury, Windsor, Moncton and Prince Edward Island were the only markets that bucked the downward trending in home sales in 2010.
By year-end, approximately 441,000 homes are expected to change hands nationally, a five per cent decline from the 465,251 sales reported in 2009. Housing values are forecast to continue to climb, up an estimated seven per cent to $340,000, compared with $320,333 one year earlier.
"Several catalysts drove sales beyond typical volumes in early 2010," says Sylvain Dansereau, Executive Vice President, RE/MAX Quebec. "In Québec, most prominent was the threat of higher interest rates and tighter lending policies. While sales eased considerably in the second half once the stimulus was removed, stable conditions now prevail heading into 2011. Low interest rates and improving consumer confidence levels should fuel home-buying activity at all price points next year. Yet, overall gains will be more muted—a welcome reprieve for purchasers."
Greater stability is expected to characterize the markets in 2011, with Canadian housing sales predicted to mirror 2010 levels at 441,000 next year, while average price is forecast to escalate three per cent to $350,000 by year-end 2011.
"In terms of resale housing activity, what many are talking about as the new normal is actually a return to the traditional real estate cycle," says Michael Polzler, Executive Vice President, Regional Director, RE/MAX Ontario-Atlantic Canada. "The past decade was truly unprecedented—never before have we experienced a run up that was as strong or lasted as long. As we have digressed from the typical pattern, people have forgotten what the usual healthy cycle looks like, but all the hallmarks are there. Ample inventory levels, steady demand, and moderate growth, both in terms of sales and prices, will characterize the market in 2011. While the pace may appear lackluster in comparison to what we've grown accustomed to, it underscores the principles of real estate 101: The market is cyclical. All boats rise and fall with the tide."
Markets in British Columbia are forecast to lead the country in terms of percentage increases in sales activity next year, with Greater Vancouver expected to climb 10 per cent, followed by Victoria at eight per cent and Kelowna at six per cent. After a prolonged period of economic hardship, Windsor is once again on track for growth, with residential home sales predicted to climb five per cent.
Almost all markets are reporting an anticipated increase in housing values next year, with St. John's in Newfoundland-Labrador in front with an estimated eight per cent hike in average price in 2011. The value of homes in Greater Vancouver, Kelowna, Regina, Saskatoon, London-St. Thomas, Ottawa, Sudbury and Greater Montreal is also predicted to climb five per cent.
"Looking forward, we see steady improvement in provincial and local economies - which will bode well for housing markets across the board," says Elton Ash, Regional Executive Vice President, RE/MAX of Western Canada. "The relentless drive in the market reminiscent of years past will be gone and instead, we can expect to see more normal, balanced market conditions, with buyers maintaining a slight edge."
In the meantime, a number of factors will continue to support sustained sales and price growth in the months and years ahead:
- Land scarcity, intensification, urban renewal, infill and renovation will continue to drive up values—regardless of supply and demand—in major metropolitan areas. The Canadian housing stock is ever-evolving, particularly in the central core of each city. With average price pushing closer to or well past the $300,000 mark in the vast majority of major centres, and affordability of single-family homes diminishing, the demand for attainable product will rise in tandem, bolstering the growing condominium segment in the years ahead.
- The upper-end of the market continues to be a strong indication of the overall health of Canada's housing sector. Typically the first segment to soften in a downturn, luxury homes posted record sales activity in 2010, and demand is expected to remain solid in 2011. Strong sales in the high-end will continue to prop up average prices.
- Immigration will remain a serious force stimulating demand, particularly given the penchant for homeownership among today's new Canadians. While the formation of new households used to take an average of five years, a growing number of newcomers arrive skilled, financially secure, and ready to make their home-buying moves. It is estimated that Canada will average 250,000 new immigrants annually.
- In the year ahead, federal, provincial and local stimulus in the form of continued infrastructure spending and capital projects will be a considerable boon to economic stability and employment, providing consumers the confidence to move forward with real estate purchases.
- Volatility in the money markets will continue to drive buyers to the tangibility of homeownership, both as a reliable long-term investment and a form of shelter, particularly given low vacancy rates and a lack of new rental construction in a number of major centres.