The latest projections for the Winnipeg real estate market were featured at the sixth annual breakfast forecast meeting of WinnipegREALTORS®. Over 300 attendees heard insightful information from guest speakers Benjamin Tal, managing director and deputy chief economist for CIBC World Markets, Tom Derrett, the chair of WinnipegREALTORS® Commercial Division and Peter Squire, the market analyst for WinnipegREALTORS®.
According to the speakers, Winnipeg’s MLS® market consistently defies expectations of a let-up. Last year, a new dollar volume record of over $3 billion was set, while MLS® sales fell just short by 14 sales of the record 13,079 units sold in 2007. It took 99 years to reach $1 billion in sales. Only nine years later, WinnipegREALTORS® tripled that amount.
The ubiquitous single-family bungalow is becoming more expensive, so apartment-style condominiums — recently upgraded or single-family attached — are being viewed by more home buyers as a more affordable alternative.
Within single-family homes, there is a significant degree of price differential in some quadrants of the city. The average sale price in southwest Winnipeg was $340,000 in 2011, whereas in the northwest, it was considerably less at $202,000.
Despite some improvement in listings — over 18,000 entered on the MLS® in 2011 (best result in years) — it is not enough to accommodate the strong demand from a growing population. The rental universe has not kept up with the increase in population, and the vacancy rate is now hovering around just one per cent. As a result, the default position for housing choice automatically goes to resale housing or new homes for new immigrants who are able to afford a significantly higher-priced home.
Squire said that it’s not often that the Bank of Canada announces no interest changes for an entire year. When mortgage rates are as historically low as they are now, and the bond market is also making fixed term rates more attractive, home buyers have a real oppportuity to make a move.
As a result of the positive momentum heading into 2012, the expectation is that sales numbers for 2012 will be similar to 2011. It is felt that the 13,000 threshold will again be reached. As for pricing, it is expected that home prices will inch upward, but only in the mid-single-digit range. Likewise, condo prices, which were static in 2011, will probably go back to the previous trend of rising in modest single-digit range — two to four per cent was suggested.
All in all, 2012 is forecast to be another strong MLS® year, with $3 billion in sales well within reach, assuming no serious impacts from external influences.
Derrett’s optimism for 2012 is tempered by lack of a good supply of commercial properties. As a result, there will be some interesting upgrades to existing buildings to accommodate the needs of new tenants. Some businesses are also deciding to build their own premises, which will tend to be outside the city due to the lack of good building sites.
However, Derrett did mention at least two new Winnipeg sites will be developed this year. Western
Financial is building a major office/retail complex on the old arena site at Polo Park, and Federated Insurance is erecting a 30,000-square-foot office at Terracon’s Tuxedo Park location as part of a new 70,000-square-foot multi-tenant building.
One of the challenges pointed out by Derrett to finding good sites in Winnipeg is a lack of servicing where land is available.
As for acquisitions, the locally-based Artis REIT, which is already emerging as a bona fide national player in their specialized commercial field, purchased MTS Place for $55.8 million and the 2190 McGillivray Blvd. Cineplex for $13 million. An industrial building at 1725 Inkster Blvd. was purchased by a REIT called PIRET for $15.1 million.
Derrett spoke of apartment investors being interested in Winnipeg due to the combination of strong immigration and a low vacancy rate.
Due to the high cost of construction in Winnipeg, Derrett is hoping to see some of the net rates for all commercial segments firm up so that there will be more opportunity for new buildings to be built.