Despite the perennial speculations of a housing market crash, there is room for growth in the Canadian real estate market, according to Emerging Trends in Real Estate® United States and Canada, as investors are moving east and toward more mixed-use developments. Canada seems poised for a year of stability regardless of concerns about a possible pullback in the Vancouver and Toronto housing markets. Housing affordability, weak income growth, and high consumer debt levels are all contributing to a dip in residential sales in Canada. Compared with the previous year, the average price for housing is expected to decline by –0.9 percent in 2017 compared with a significant spike of 10.6 percent in 2016. While Toronto and Vancouver will be hit the hardest by this downward trend in housing prices, other markets in the east including Halifax, Ottawa, and Québec City are forecast to grow slightly.
Top Five Markets
Vancouver: Vancouver is the top investment, development, and housing market in Canada. Millennials are driving up the city’s rental market, searching for new, higher-quality units near amenities and transit. Rental vacancy rates have been around or below 1 percent for the past five years. Another emerging challenge is the lack of amenities such as stores and schools in the downtown core.
Toronto: The lack of development supply for all residential typologies is a key factor contributing to the market’s rapidly rising house prices. Due to the high cost of moving, more homeowners are choosing to invest in renovations. Many respondents believe that government land use policies are a factor holding back supply. Toronto’s condominium inventory has hit a ten-year low and demand remains strong, so respondents expect more high-rise multiresidential projects to enter the pipeline in the years ahead.
Ottawa: Demand for new homes is down sharply since there are not enough families interested in buying single-family homes. Ottawa housing starts have fallen for three straight years, and some developers are shelving their development plans for up to five years.
Winnipeg: Winnipeg’s economy is expected to see sustained growth. Building activity should remain healthy over the short term, propelled mainly by nonresidential projects that will help offset a slowdown in the residential market.
Montreal: Montreal continues to absorb the city’s condo stock, and “pure” condominium plays have given way to mixed-use developments. More of these are on the horizon, especially around transit hubs, and the trend is increasing cooperation between investors and developers.