There are no surprises in the real estate data that’s pouring in to the brokerage houses and real estate boards across the country. Home prices in Toronto and Vancouver continue to climb to dizzying heights, while cities in Alberta, and to a lesser extent places in Newfoundland and Saskatchewan began to feel the impact of lower housing demands.
“A glance at our national house price composite points to a very strong Canadian real estate market, yet the findings contain extreme regional disparities of the kind we haven’t seen in over a decade,” said Phil Soper, president and CEO of Royal LePage.
Soper is referring to the divergence between Canada’s two hottest markets and the resource-dependent provinces. For instance, the GTA has sustained its 8% year-over-year home price gains, while Vancouver has surpassed year-over-year price increases with a 21.6% increase. In contrast, Calgary’s prices followed the sales activity decline that started last year. As such the average price of a two-storey home dropped by 1%, while bungalows faired a bit better with average declines of only 0.2%. (Condos dropped by 0.3% in year-over-year pricing.)
The danger, though, is that recent price drops in resource-dependent cities are just the beginning. Sales volume started to decrease last year and this is only just trickling into the marketplace. This is, in part, because the labour force redistribution has prompted a slow, steady out-migration of people from Calgary, Edmonton and to a lesser extent Regina and Saskatoon.
“Redistribution of labour across the country is further reinforcing disparities among housing markets, as the broader impacts of the oil recession on Alberta’s economy take hold,” says Soper. “We expect British Columbia, followed by Ontario, to be the top recipients of new household inflows in the coming year, which will further fuel housing demand and price appreciation in Greater Vancouver and the GTA.”
This migration away from oil-dependent cities to large, more unaffordable municipalities is in sharp contrast to where people were settling down between 2011 and 2014 and in the mid-2000’s. “That’s when the booming energy sector attracted families from all over Canada to Alberta,” explains Soper.
One big surprise was how well Montreal appears to be doing in this sluggish economic environment.
“Following a multi-year period of stalled economic and residential real estate market growth, the Greater Montreal Area is seeing a frankly wonderful upswing in demand and unit sales, which often foreshadows stronger home price appreciation,” said Soper. “While Quebec has been slower to reap the economic benefits of more affordable energy costs in addition to the big three factors driving markets elsewhere in Canada – low interest rates, a lower dollar and expanding U.S. economy – the region is turning a corner. My vote goes to Montreal as the city most likely to exceed expectations in 2016.”