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Stability of local housing market
Jan 08, 2016

A May 2015 WinnipegREALTORS® column in the REN emphasized the stability of the overall MLS® market. It was pointed out that in 38 years there had been only two times that the average house price had dropped. In both years, there was only a two-per-cent decline. 

Later in the year, we discovered that in the annals of the 112-year existence of WinnipegREALTORS® that there was a chart showing average MLS® house price sales going back to 1965. Lo and behold, we found one more year — 1982 — that had a modest decrease from $55,231 in 1981 to $53,994. The following year, the average house price rebounded strongly with an increase of 10 per cent to $59,498.

So in 50 years, the Winnipeg housing market has been remarkably stable. True to form, the year-end average house price for 2015 held steady again with a 1.9 per cent increase over 2014. The actual price was $293,992, compared to $288,486 in 2014.

Winnipeg’s house prices are among some of the most affordable in the country. Of the 9,599 home sales in 2015, 59 per cent of them sold for under $300,000. Another 25 per cent sold from $300,000 to $399,999 and 10 per cent from $400,000 to $499,999.  For comparison purposes, 14 per cent of the city of Calgary’s house sales fell under $300,000 in 2015, while another 34 per cent sold from $300,000 to $499,999.

This brings out another interesting point in light of the change of Canada Mortgage and Housing Coporation (CMHC) financing rules slated to come into effect this February. In December 2015, the federal government announced its intentions to raise the minimum down payment requirements on homes valued over $500,000 from five per cent to 10 per cent.

To be clear, the 10-per-cent down payment requirement will only be applied to the amount over the $500,000 value, not to the entire amount. If a home is valued at $600,000, your down payment will be $25,000 on the $500,000 amount and then $10,000 on the remaining $100,000. In total, your down payment will be $35,000 as opposed to $30,000, if this change was not made and five per cent was applied to a $600,000 home.

As a result of Winnipeg’s far more affordable housing market than Calgary’s, the vast majority of our house sales will not be impacted by CMHC’s higher down payment requirement for homes priced over $500,000. In Calgary’s case, over 50 per cent of homes sell for over $500,000.

What this one change amply demonstrates is how all markets are local. Even the Canadian Real Estate Association (CREA), as much as they expressed disappointment with this announcement in December, recognized the tiered approach the government took is more preferable to an increase in minimum down payments to all consumers, especially in light of the importance of first-time home buyers to the market and economy as a whole.

CREA has also been very good at explaining the reason for the difference this change can make on markets with higher house prices. Beyond the most talked about and expensive markets of Vancouver and Toronto, there are six other markets in Canada currently which have average prices over $500,000. So watch for the unintended consequences on markets that are nowhere near as robust as Vancouver or Toronto.

The best example in 2015 is Fort McMurray. CREA reported at the end of November house prices year-over-year fell nearly $125,000 from $642,000 to $519,000.

In comparison to other Canadian house markets, you will be hard pressed to find any market which exhibits the steady-as-she-goes traits Winnipeg does year-in and year-out. While less likely to capture bold headlines and concern over disruptive changes, Winnipeg should be content to plod along with consistent sales. 

More information on Winnipeg’s 2015 MLS® market and what lies ahead in 2016 will be presented at the WinnipegREALTORS® 2016 forecast breakfast on Wednesday, January 27 at Canad Inns Polo Park. The featured speaker is Alexander Fritsche, a Calgary-based Bank of Canada senior economist.

The local commercial real estate market will also be covered off by WinnipegREALTORS® commercial division chair Stephen Sherlock. CentrePort CEO Diane Gray will be providing an update on all of the important developments in the 20,000-acre inland port.