Modest Price Increases Expected in 2019
December 27, 2018
Modest Price Increases Expected in 2019 – Two of the country’s largest residential real estate brokerages along with CREA (Canadian Real Estate Association), one of Canada’s largest single-industry trade associations, have provided their market outlook for 2019.
According to Royal LePage CEO Phil Soper, home prices across the country are expected to rise by 1.2% to $638,257, with Toronto and the surrounding areas expected to rise by 1.3% to $854,552. Would be buyers, who for years had been shut out of hot markets in Toronto, may have a bigger opportunity to purchase in 2019. Soper expects a jump in sales activity this coming spring. Some contributing factors to consider would be strong economic fundamentals, including a robust rate of new household formation and excellent employment growth.
Demographic shifts and immigration will put increased pressure on limited housing supply in the coming years. This continued population growth should cause the suburbs to stabilize and reignite price growth. Expect prices and sales activity in the detached home segment to firm up in 2019.
Although the spring market is expected to see an increase in sales activity the 2019 market overall will see a more tepid pace. Uncertainties such as slow rising interest rates, global trade risks and the low price of Canadian export oil are all factors to closely monitor.
CREA (Canadian Real Estate Association)
The Canadian Real Estate Association expects national homes sales to remain relatively flat in 2019 (456,200 units or 0.5% increase), as rising interest rates combined with the mortgage stress-test offsets continuing population, job and income growth. However, even with sales remaining relatively flat CREA predicts that the national average sales price will increase by 1.7%.
In Ontario, a small rebound in sales and continued gains by Quebec will be negated by the continued decline in British Columbia and Alberta.
Economic and demographic fundamentals remain supportive for housing demand in many parts of the country, while policy headwinds together with rising interest rates are limiting access to mortgage financing and negatively impacting homebuyer sentiment.
RE/MAX is anticipating that the market will continue to stabilize in 2019 with the average sales price increasing by 1.7%. Canadian’s will begin to feel the pinch of higher interest rates as they move forward with their home-buying plans in 2019. “The government has said it may not be as conservative with raising rates as they have been in the past. That’s why there’s uncertainty. People don’t really know what to expect,” indicated Christopher Alexander, Executive Vice-President and Regional Director at RE/MAX of Ontario-Atlantic Canada. Overall sales were down by 16% in 2018 and the single detached market fell short. Due to high prices, RE/MAX expects fewer sales of single detached homes. However, properties priced below $1 million are expected to remain strong in 2019.
Christopher Alexander also added, “Demand isn’t as strong as it was in the past, but it is still very, very strong”.
Forecasting is a tool that helps individuals in their attempt to cope with the uncertainty of the future. Our team outlook for 2019 sees the continued normalization of the marketplace and we expect an active and busy market, with lots of homes trading hands. There will be ongoing pressure on prices for homes where first-time buyers are most eligible. However, with tougher mortgage-qualification rules, further interest rate adjustments the market will be tentative throughout most of 2019.
Last year, CREA predicted that we would see a 1.4% decline in the average sales price in 2018. As of the end of November 2018, the national average sales price is witnessing a 1.7% decline. Right now, we believe that we are in a healthy marketplace where both buyers and sellers are both benefitting, which is good news for the real estate industry.
Modest Price Increases Expected in 2019 – was written by Benczik Team Realty
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