Spring 2020 Real Estate Market Forecast
Spring 2020’s Real Estate Market Forecast is here!
Royal LePage released a House Price Survey on January 9, 2020, stating that aggregate home price in Canada has increased by 2.2% year-over-year, reaching $648 544 by the final quarter of 2019– much like in the third quarter where buyers were seen steadily returning to the real estate market, after the federal mortgage stress test in the first half of the year had caused potential buyers to step back and wait it out in anticipation of its potential implications.
President and CEO of Royal LePage, Phil Soper, said that since the Great Recession ten years ago, this is the first time a significant housing market correction has been maneuvered.
Even though there was a significant drop in the buying and selling of properties during the 2018-19 downturn, the overall value of Canadian homes has prevailed. He added that although the regions still suffering from an oil and gas sector downturn have seen declines, only minor, single-digit declines have been seen in Ontario and B.C.– which is where price inflation had been it’s most aggressive in recent years.
Changes to the Mortgage Stress Test
The federal government has signaled that the mortgage stress test mechanism may be subject to change in 2020. Phil Soper said that people across Canada were temporarily displaced from the real estate market due to the stress test, and although most have adjusted, it is still an obstacle for many families hoping to own their own home. He added that the impact of regulations-driven decrease in demand is not felt the same in different parts of the country, and he believes that policymakers have the necessary experience to adjust the tool to reflect the reality of Canada of today, that is– “we have very different and varied economies, and by extension housing policy needs, from region to region.” If the federal government proceeds with changes to the mortgage stress test in 2020, Royal LePage recommends a regional approach.
National Market Summary
Proprietary property data from 64 of the largest real estate markets in the nation is used in compiling the Royal LePage Price Composite. The data shows that the median price of a two-storey house climbed 2.3% year-over-year reaching $761 817, whereas the median price of a bungalow showed slower growth at only 0.7% to $537 622. The data analyzed was provided by Royal LePage’s sister company, RPS Real Property Solutions, and included both resale and new build transactions.
With a median price rise of 3.3% year-over-year up to $487 525, condominiums have remained the leading house type all across Canada in terms of rate of appreciation.
As the gap between condominiums and detached houses shrinks, the detached house option is becoming more attractive for younger people and families looking for more space for their growing families, and as such, even after seeing significant price gains in the condominium segment, double-digit gains are far less common now.
The aggregate price of a home in Canada is expected to climb 3.2% year-over-year in 2020, up to $669 800, according to the Royal Lepage Market Survey that was released in December of 2019. The company’s 2020 forecast is dependent on consistent economic conditions, assuming no new housing policy changes.
GTA Market Summary
Home prices in the Greater Toronto Area are still being fueled by low supply, population growth, and consumer confidence. The aggregate price of a home in the region increased in the fourth quarter, with a 4.8% year-over-year up to $843 609, while the median price of a standard two-storey home and bungalow increased by 4.4% and 2.4% to $982 944 and $806 977 respectively. Condominiums rose by 7.8% to $565 919 during the same period.
Chief Operating Officer of Royal LePage, Kevin Somers, says signs indicate the Greater Toronto Area may be at a point where drastic price increases may be coming– more potential buyers are trying to enter the market, while listings in the area are low in supply.
There was a significant variation of home price growth across the region– while stabilizing prices and healthy growth are seen in some areas, several other regions, including the city center, owing to high demand and low inventory, showed the potential for fast-growing appreciation rates.
Pickering and Mississauga showed significant price gains, with year-over-year price increases at 9.7% and 7.9% respectively. The City of Toronto showed a year-over-year aggregate price increase of 6.6%.
The cities of Ajax and Oshawa were the only two areas to show a year-over-year decline in aggregate price. The aggregate price of a home in Ajax and Oshawa decreased by 1.2% and 1.8% to $661,049 and $524,423, respectively.
If you’re thinking of buying, selling or investing in 2020, familiarizing yourself with current market conditions is the first step in determining a course of action. If you live in the GTA and would like a market summary for your area, please feel free to contact us.