A strengthening economy in 2014 should lift Winnipeg existing house sales following a small downtick this year, according to a recent Conference Board of Canada report commissioned by Genworth Canada.
The Conference Board’s Autumn Metropolitan Housing Outlook is also forecasting that price growth is expected to edge higher next year as sales pick up
In fact, the forecast is for a 3.3 per cent average resale home price increase to $263,529 this year, followed by a 3.8 per cent increase to $273,446 in 2014 and a 4.3 per cent increase to $285,115 in 2015.
Calgary is expected to see the largest increase in housing prices in percentage terms between 2013 and 2015, with Edmonton and Winnipeg close behind. The rest of Canada’s metropolitan areas will experience more moderate growth, in line with the national average.
The outlook also reported that media predictions of gloom and doom for the Canadian real estate market are overstated.
The Conference Board is forecasting a soft landing for Canadian housing markets, said Robin Wiebe, senior economist for the Centre for Municipal Studies at the Conference Board. “A crash would require a significant negative surprise like an interest rate spike or employment collapse. Since no such shock is in the cards in Canada, a housing crash like the one in the U.S. is nowhere near a possibility."
The Winnipeg new home market should be rock-solid thanks to healthy new-unit absorptions, according to the report, but a slight pullback in housing starts is expected for 2014 as multiple-family construction dips. Still, the medium-term outlook features a decent economy and brisk population growth that will underpin continued resale transaction and price advances, along with buoyant housing starts.
“Excellent ownership affordability and evidence of slight pent-up demand for new construction are additional positive factors,” according to the Conference Board.
Job gains in 2014 should also strengthen demand, cutting the unemployment rate to 5.5 per cent, following a projected 16-year high of 5.9 per cent this year.
“Winnipeg’s resale market is balanced and is expected to remain in this state throughout our forecast,” the report continued. “Still, the market is cooling slightly; easing sales demand and rising listings supply point to moderating price growth this year. Thereafter, rising sales will support slightly stronger price advances.
“Existing home sales averaged just over 11,700 units at an annualized pace during the first half of 2013. This was down modestly from the pace in the second half of 2012 and from last year as a whole. We expect sales to pick up slightly in the second half of 2013, but still end the year below 11,900 units. While this volume is a three-year low, it remains above the past decade’s average.
“Moreover, transactions are forecast to rise three per cent in 2014 and 2.7 per cent annually on average between 2015 and 2017. The 13,200 sales we expect by 2017 would be a record high for this market.”
The Conference Board reported that new listings have edged higher recently, averaging nearly 17,000 units at an annual rate in the latest two quarters, the most since 1998. But increases have been gradual — between 1.8 and 3.2 per cent annually over the past three years — suggesting that potential home sellers believe a healthy market will value their units fairly.
Generally easing sales and rising listings cut the sales-to-new-listings ratio below 70 per cent in the second quarter, the lowest since the first quarter of 2009, but still signalling a balanced market.
“For all of 2013, we expect the ratio to average 69 per cent, the lowest since 2000. This still points to a balanced market and will be the highest ratio among the cities covered in this report next year.
“By 2017, we expect slightly faster gains in listings than in sales to trim the ratio to 63 per cent,” according to the Conference Board report.
“Notwithstanding price gains and expected interest rate hikes, Winnipeg housing will remain relatively affordable. Principle and interest charges on the city’s average resale unit are forecast to consume only 16.6 per cent of average household income in 2014, above only Calgary and Edmonton among the nine cities in this report.”