Home prices expected to fall 1.2% in 2016

After declining slightly in 2015, average home prices in 2016 are expected to dip by more than one per cent in Saskatchewan, one of three oil-producing provinces that will see lower home prices next year, according to the latest forecast from the Canadian Real Estate Association (CREA).

CREA is estimating Alberta's average housing price will fall by 2.5 per cent in 2016, while house prices in Saskatchewan are expected to decline by 1.2 per cent and by one per cent in Newfoundland and Labrador.

Average home prices in Saskatchewan were $294,110 in November, down 0.4 per cent from $295,487 in November 2014. Regina saw average prices increase 3.7 per cent to $309,240 in November, while Saskatoon's dipped 1.9 per cent to $339,465 year over year.

Saskatchewan is also expected to see the second-largest decline in sales activity in 2015, with projected sales down 10.8 per cent, next to Alberta's 21.4 per cent drop, the association said.

Meanwhile, Canada's national average house price is expected to edge higher by 1.4 per cent in the year ahead, to $448,700 — with Ontario leading the other regions with an increase of 2.9 per cent.

CREA says that low interest rates will boost sales, but that recently announced federal reforms to mortgage lending rules will have a negative effect beyond the intended targets in the Vancouver and Toronto areas — Canada's most expensive markets.

“Minimum down payments will be going up for homes that sell for more than half a million dollars, so larger more expensive housing markets will be affected most,” said CREA chief economist Gregory Klump.

“Unfortunately, the regulatory changes will also cause unintended collateral damage to housing markets beyond Toronto and Vancouver, including places that are facing economic headwinds from the collapse in oil prices.”

Sales activity in Calgary's housing market — it has been struggling to cope with the drop in oil prices to the lowest levels since early 2009 — will be one of the markets affected by the higher minimum down payments for properties above $500,000.

Compared with statistics a year earlier, November's sales activity was up 10.9 per cent with gains in two-thirds of local markets — with Calgary among those to see a decline from what had been historically high levels in November 2014.

The national average sale price was up 10.2 per cent to $456,186. Excluding the Greater Vancouver and Greater Toronto areas, the national average price would have been $338,969 in November, up 3.4 per cent from a year earlier.

CREA has revised its 2015 fullyear estimates upwards since its September forecast, largely because of the strength of British Columbia and Ontario. The association is now expecting Canada will have the second-highest sales activity on record this year, with an increase of five per cent to 504,000 units this year.

B.C. is expected to have the biggest regional increase, with a 21.4 per cent jump from 2014's sales levels. Ontario home sales are projected to be 9.3 per cent higher in 2015 than last year, but that figure would likely have been higher but for a shortage of lowrise homes around the Greater Toronto Area.