The Greater Toronto Area (GTA) housing market shows few signs of slowing down, while conditions in Calgary, Edmonton, Ottawa and Winnipeg are also healthier than some might expect.
“Toronto is a tale of two markets,” said Fortress Real Developments‘ senior vice-president of market research and analytics Ben Myers, who authored the latest Market Manuscript report that examined the housing situations in the five cities.
“We have a low-rise housing market that’s appreciating at a 10 to 12 per cent rate and even higher in the new low-rise housing market, where growth is in the neighbourhood of 15 to 17 per cent.
“Then you have the high-rise market where there’s enough supply to satisfy demand and you’re seeing prices go up three to four per cent a year.”
Small low-rise supply in GTA
The Greenbelt Act, increasing commuting times, strong employment and consistent migration have all contributed to the supply/demand imbalance for low-rise housing in the GTA, as supply has fallen to its lowest level since the 1990s and subsequently driven up prices.
“People want to be in the City of Toronto and the inner suburbs like Mississauga, Vaughan, Richmond Hill and Markham, which are very desirable communities that don’t have a lot of low-rise supply,” said Myers. “Overall in the GTA we’re down to 4,000 unsold new units, and 10 years ago that was 17,000 units.”
More than 43,000 new units were easily absorbed into the Toronto market in 2015 and Myers exceeds most analyst forecasts by expecting 42,600 housing starts this year. Increased rental apartment construction is part of what’s fuelling Myers’ “most bullish forecast to date.”
While oil prices have been making a small comeback this year and were sitting just below $40 a barrel earlier this week, Myers doesn’t think that will have much of an effect on the Calgary housing market.
“Most of the people in the energy market aren’t going to make any type of investment in additional drilling or exploration until they see oil prices well in excess of $60 a barrel. Without new investment, we’re not going to see many new jobs and people with new jobs looking for homes.
“I was surprised to see that there still seems to be a general interest from first-time buyers in the Calgary market because they don’t have to sell their existing home, but there’s some trepidation from move-up buyers about their ability to sell their home at a price that they would need to move up.
“I think we’re going to see relatively flat housing in terms of transactions and pricing moving forward.”
While the Edmonton central market area (CMA) continues to feel the negative impacts of the energy sector decline, the housing market has been surprisingly resilient with transaction activity remaining near longer-run averages.
However, with just over 1,600 in 2015, Edmonton’s new condominium sales volumes fell 55 per cent from a record 2014 and were 38 per cent lower than the average sales from 2011 to 2014. Completed and unabsorbed supply increased by 63 per cent overall and 112 per cent for condo apartments.
A low Canadian dollar should aid Ottawa’s growing technology sector and boost employment while attracting new startups. This should benefit a housing market that saw resale transactions increase by 5.3 per cent in 2015, and forecasters are calling for annual resale price growth of two per cent or greater this year.
“Ottawa seems to be recovering and there was a decent pick-up in activity and traffic to new home sales offices following the federal election,” said Myers.
There were 4,400 housing starts in 2015 in the Winnipeg CMA, an increase of 3.6 per cent over 2014, topping the five-year average of 4,150. Prices rose from one to two per cent, according to different sources.
“The market performed very well in 2015 and had fairly strong starts activity,” said Myers. “We launched our 46-storey tower (SkyCity Winnipeg) in Winnipeg last year, which was the largest project in the entire province.
“There was some trepidation about making sales, but we’ve sold almost 150 units since we launched in September. We’ve had a lot of investor interest in smaller units and a lot of end users are buying the bigger units.
“That was a pleasant surprise and we’re seeing a lot of interest in the downtown area, with other developers making plans for condo towers and rental towers.”