Real Estate Market Momentum Continues into 2014

Thunder Bay's Hot Real Estate Market is fuelled by high demand, and low supply of new homes.
Thunder Bay's Hot Real Estate Market is fuelled by high demand, and low supply of new homes.

Thunder Bay's Hot Real Estate Market is fuelled by high demand, and low supply of new homes.
Thunder Bay’s Hot Real Estate Market is fuelled by high demand, and low supply of new homes.

Thunder Bay Remains Real Estate Hot!

TORONTO – Real Estate – Thunder Bay remains a hot real estate market. Demand for homes is high, and supply of solid homes remains tight. That has driven prices in the marketplace upward in many cases. The home market is hot. The fourth quarter of 2013 saw new home construction slightly behind the ten year average. That makes for a tighter supply and competition in the market for many homes.

Housing starts in Thunder Bay, Census Metropolitan Area (CMA) were trending at 322 units in December down from 347 units in November according to Canada Mortgage and Housing Corporation (CMHC). The trend is a six month moving average of the monthly seasonally adjusted annual rates (SAAR) of housing starts.

Slower than Average December for New Home Construction

“A slightly below average month for construction of single-detached housing in December weakened housing starts for the month in Thunder Bay. Nine singles starts were three units behind the 10-year average for the month. This, coupled with no multi-family activity, brought to a close a rather weak fourth quarter in an otherwise relatively healthy year for new construction,” stated Warren Philp, CMHC’s Market Analyst for Thunder Bay.

Cold weather and the holiday season were factors for many builders in December.

Business Growth Opportunities in Thunder Bay

However the market for business properties is doing well with a number of positive moves coming forward in the last quarter of 2013. Likely the place to watch in 2014 is going to be the downtown Fort William Business Zone. There are a number of properties that have changed hands as development in the area is presenting greater opportunities for entrepreneurs in the city.

The opening of the new Provincial Courthouse has sparked some enthusiasm at political levels. At the business level, there are several changes coming forward as several new businesses are getting set to open in the downtown south. Many entrepreneurs in Thunder Bay are opening companies, and in effect creating their own jobs. Office space in the Fort William area is affordable and in an area with potential.

Across Canada, housing starts in Canada were trending at 195,760 units in December compared to 196,430 in November, according to Canada Mortgage and Housing Corporation (CMHC). The trend is a six-month moving average of the monthly seasonally adjusted annual rates (SAAR) of housing starts.

“The trend in housing starts has remained essentially stable since October 2013. Housing demand continues to be healthy in Canada. The trend in existing home sales has been increasing since April 2013, while the trend in inventories of newly completed and unabsorbed homes has been declining at a modest pace since September 2013,” said Bruno Duhamel, Manager of Economic and Housing Analysis at CMHC.

Ice Storm Did Not Hammer Housing

“The trend in housing starts in Toronto was stable in December, while at a level somewhat higher than the lows which occurred mid-year. Mortgage rates and employment were relatively unchanged over the past two months, contributing to the stabilization of housing demand,” said Ed Heese, CMHC’s Toronto Senior Market Analyst.

Canadian Outlook for Real Estate – Positive

The Royal LePage House Price Survey and Market Survey Forecast says the average price of a home in Canada increased between 1.2 per cent and 3.8 per cent in the fourth quarter of 2013.

The survey showed year-over-year average price increases in the fourth quarter of 2013 of 3.6 per cent to $418,282 for standard two-storey homes and 3.8 per cent to $380,710 for detached bungalows, while the average price of a standard condominium rose 1.2 per cent to $246,530. Prices are expected to maintain healthy momentum into 2014, with Royal LePage projecting a 3.7 per cent increase nationally from 2013 and a shift to a seller’s market in the first portion of the year.

“A few short months ago, the country’s housing market emerged from a year-long correctional cycle of dramatically slowed sales volumes. Later 2013 was marked by a transition to buoyant sales volumes and above average price growth,” said Phil Soper, president and chief executive of Royal LePage. “In the absence of some calamitous event or material increase in mortgage financing costs, we expect this positive momentum to characterize 2014. In fact, we expect a market tipped decidedly in favour of sellers for the first half of the year, after which we project a shift to a more balanced market.”

Continued Upward Pressure

“We predict continued upward pressure on home prices as we move towards the all-important spring market. In addition to normal demand, housing prices in Canada this year will be influenced by buyers who put off purchase plans in the very soft spring of 2013,” continued Soper. “Talk of a ‘soft landing’ for Canada’s real estate market in the new year is misguided.  We expect no landing, no slowdown, and no correction in the near-term. Conditions are ripe for as strong a market as we saw in the post-recessionary rebound of the last decade.”

Canada’s economy is expected to perk up in the year ahead, supported by increased business spending, improving employment and wage prospects, and a pick-up in exports propelled by a recovering U.S. economy and a lower Canadian dollar, among other factors.

“We believe aggressive government intervention, such as further restrictions on first-time buyer’s access to insured mortgage financing, or significant increases in interest rates, is unlikely to occur in 2014,” said Soper. “Our forecast assumes a continuously improving economy, both at home and abroad.”

While most indicators point to a strengthening housing market, some optimism has been overshadowed by fears of instability in Canada’s real estate market resulting from high volumes of condominium projects in major Canadian cities.  In light of this growing discussion, Royal LePage released a report in December 2013 analyzing the sustainability of condominium markets in Montreal, Toronto and Vancouver.

The report found that while actual condominium production across these three cities currently exceeds estimated near-term consumer requirements, strong condo market activity has been generated by important fundamentals including low interest rates, strong job creation in central areas of cities, evolving consumer preferences and conditions that can make condo ownership an effective investment opportunity.  According to the report, this strong activity “is not sufficient evidence of a housing bubble,” but rather the result of positive economic forces and changes in demand patterns supportive of condominium living.

Regional Market Summaries

Despite a swelling of inventory at year’s end, the Halifax housing market made strong gains in 2013. Standard two-storey homes saw the largest year-over-year gain, with the average price increasing 4.8 per cent to $329,633. At the same time condominiums increased 2.9 per cent and detached bungalows increased 2.4 per cent. Average Halifaxhouse prices are forecast to increase by 1.1 per cent in 2014.

St. John’s housing prices shot up again in the fourth quarter, with all three housing types experiencing 9.0 per cent or greater year-over-year growth. An increase in the supply of homes available for sale in that market point to more moderate price appreciation in 2014.

The price for standard two-storey homes in Montreal increased markedly in the fourth quarter, increasing by 5.8 per cent to $401,714. Other housing categories were more balanced, with detached bungalows rising by 2.9 per cent and standard condominiums declining a modest 0.4 per cent.  Average housing prices in Montreal are forecast to increase by 1.4 per cent in 2014, partially because of an expected decline in unit sales.

Prices for detached homes in Ottawa increased slightly on a year-over-year basis, with the average price for standard two-storey homes increasing 2.2 per cent to $397,667 and detached bungalows increasing 2.4 per cent to $395,167.  Condominiums saw a slight depreciation in prices in reaction to a surge in available units. Average home prices in this region are expected to see mild growth of 1.6 per cent in 2014.

Shortages in Toronto Generates Pressure

A supply shortage of detached homes in Toronto led to steady increases in the average price for these types of properties, with standard two-storey homes increasing 2.7 per cent to $686,250 and detached bungalows increasing 3.9 per cent to $580,151. Over the same timeframe standard condominium prices were up slightly, increasing by 1.0 per cent to $360,272. Toronto home prices are expected to grow by 3.9 per cent in 2014, while unit sales are projected to increase by 0.9 per cent.

The Winnipeg housing market witnessed mixed results in the fourth quarter, with condominiums experiencing a significant 7.2 per cent year-over-year price increase based on a surge in demand for this housing type. Standard two-storey homes showed more modest growth increasing 2.0 per cent, while detached bungalows were down slightly with a 0.1 per cent decrease. The average price of a home in Winnipeg is forecast to rise by 2.0 per cent year-over-year in 2014.

A surge in supply of homes available and prudent buyers in Regina led to modest price depreciation for detached homes in the area. Standard two-storey homes dropped 3.2 per cent year-over-year to $370,250 while bungalows declined 0.5 per cent to $331,500. At the same time standard condominiums posted a slight increase of 0.6 per cent. The city’s residential real estate market is expected to bounce back in 2014, with average prices projected to increase by 2.5 per cent.

The Calgary market saw strong year-over-year price appreciation across all housing types as inventory shortages continued. Average prices for detached bungalows increased 6.4 per cent year-over-year to $468,967 and standard two-storey homes increased 6.1 per cent to $461,089, while condominiums rose 7.0 per cent to $269,778. With continued supply scarcity expected in the year ahead, average prices for homes are predicted to increase by 5.1 per cent.

In the balanced Edmonton market, detached bungalows rose 3.7 per cent year-over-year to $344,626 while standard two-storey homes posted a modest increase of 1.9 per cent to $363,075. In the same period, condominiums increased by 2.2 per cent to $207,270. Looking ahead to 2014, average house prices are expected to rise by 3.0 per cent.

Confidence crept back into the Vancouver market, with prices for all housing types seeing moderate growth. The average price for detached bungalows increased 4.0 per cent year-over-year to $1,041,300 and standard two-storey homes increased 3.3 per cent to $1,139,050, while condominiums rose 2.3 per cent to $492,500. The momentum of the real estate market is expected to carry over into the New Year, with prices projected to rise 4.4 per cent in 2014.