Country’s biggest housing markets to reap rate rewards
Toronto, Vancouver benefit from lower interest, but rest of country could slump, economist warns
Lower interest rates could keep Canada’s two biggest housing markets — Toronto and Vancouver — buoyant for some time, even as slumping oil prices take their toll in Calgary and Edmonton, where sales are dropping and prices are expected to follow.
That’s the prediction of longtime housing bear and Capital Economics economist David Madani as monthly house and condo sales figures for January started rolling out across the country this week.
Consumer confidence is now taking a beating in Edmonton and Calgary, where home sales fell 26 and 39 per cent respectively in January. That could translate into a15-per-cent downturn in prices for Calgary, he added in a note released Wednesday.
But both Toronto and Vancouver could see an even further uptick in sales, especially if the Bank of Canada overnight rate drops another quarter of a percentage point in March, just in time for the peak spring market.
A50-basis-point drop in the five-year mortgage rate could drive a 5.5-per-cent quarter-on-quarter increase in home sales, added Madani.
But across Canada, he’s predicting a drop in sales and a 2-per-cent decline in average house prices this year.
January may have been bitterly cold, but the lack of snow brought buyers out in droves, with the Toronto Real Estate Board (TREB) reporting “a strong start to 2015” in sales figures released Wednesday.
The composite benchmark price of a home in the GTA rose 7.5 per cent in January, year over year, bringing the average sale price to $552,575. Sales were up 4.9 per cent over January 2014, says TREB.
“I’d say, if anything, buyers are a bit more excited than they were two months ago because of lower interest rates,” says Toronto realtor David Fleming. “A lot of what’s happening in the Canadian economy around oil prices and job losses is not having a direct impact on the Toronto market.
“The same old problem is still listings: I have 16 active buyers who would all buy the right property if it were available.”
TREB is even predicting that demand for condos will be “robust” throughout 2015, enough to drive price growth above inflation.
New listings were up 9.5 per cent in January, although active listings — the combination of new and previous listings still unsold — were still down 2.5 per cent year over year, which means the market remains tight.
Mortgage broker Joe Sammut of Mortgage Architects says he’s seen a dramatic pickup in applications for pre-approvals since the recent drop in the overnight Bank of Canada Rate to 0.75 per cent.
The weak dollar has also had an impact, with more Americans looking to buy second homes or future retirement properties north of the border.
“I’ve had two American buyers in the last week say, ‘OK, my affordability has just gone up $300,000 because of the exchange.’ One is a couple from San Francisco who have been sitting on the fence for eight months and are now ready to pull the trigger because they’re looking at 21 cents on the dollar.”
Some realtors are even expecting an early spring market.
“Buyer sentiment remains very favourable in terms of the overall economy in the GTA,” says high-end realtor Paul Maranger of Sotheby’s International Realty Canada.
“I think Ontarians are looking at oil prices in terms of how much they are saving on gas and heating their homes.”
Detached-home sales across the GTA were up 7.1 per cent in January and prices up 4.2 per cent, to an average of $716,127.
Semi-detached sales were up 0.7 per cent. The average sale price of a semi across the GTA was up 7.8 per cent in January, year over year, to an average of $520,510.
Townhouse sales were up 0.6 per cent and prices were up 8 per cent across the GTA, although sales spiked by 14.5 per cent in the city of Toronto, bringing the average price to $440,058 across the GTA and $502,267 in the 416 region.
Condos recorded the highest sales growth of all housing types as more people find themselves priced out of the lowrise house market: Sales of those were up 11.2 per cent across the GTA and prices climbed an average of 3.6 per cent.
That brought the average condo price to $382,458 in the city of Toronto, up 4.5 per cent, while prices averaged $310,045 in the 905 regions, up 3.6 per cent.