Data released in the 2019 Emerging Trends in Real Estate report published Oct. 10 by PricewaterhouseCoopers (PwC) Canada and the Urban Land Institute (ULI) show Toronto and Vancouver continue to lead all Canadian cities in terms of real estate investment prospects. However, every real estate market has its own opportunities and challenges. We explore five of the markets to watch in 2019.
With net immigration into the Greater Toronto Area (GTA) hitting a 15-year high and pent-up demand for housing, Toronto edged out Vancouver as the top market to watch this year. According to the Conference Board of Canada (CBoC), the local construction sector is on track to record its 10th straight year of growth in 2019, with GDP growth forecast to reach 2.4 per cent in 2018 and 2.3 per cent in 2019.
Respondents also ranked Toronto’s housing prospects first among all markets. Efforts by Ottawa and Queen’s Park to cool the residential market, combined with rising interest rates and high consumer debt, could still put another brake on prices. But strong drivers of demand remain indisputable. The region is also feeling the effects of demographic shifts. Millennials have begun to compete with Baby Boomers for real estate, and over the next decade, almost 700,000 first-time buyers will target the GTA or Hamilton markets, according to a May 2018 report sponsored by the Ontario Real Estate Association.
Due to little relief on the supply side, several interviewees expect Toronto land costs to hit Vancouver levels before long. “The next 12 months will be a buyer’s market, and then we’ll start to move back to a seller’s market and prices will ramp up to new highs,” says one interviewee. Townhouses were also considered a best bet, appealing to entry-level buyers. And although there’s rising concern about the sheer number of new condo projects, multi-family demand will remain strong.
Vancouver’s economy is forecast to grow 2.3 per cent in 2019 after seeing 2.9 per cent growth in 2018. Overall, the region’s real estate fundamentals look good, and even after years of price increases, interviewees say, “Vancouver continues to defy gravity” in terms of commercial investment prospects. But the market may yet come back to earth, with interviewees noting they’re being more cautious and selective when looking at new opportunities to invest or develop.
Single-family sales are cooling in the face of high prices, rising interest rates, tougher mortgage rules and a series of cooling measures being implemented by the BC government. These include an increase in the foreign-buyers’ tax to 20 per cent, an empty homes tax equal to one per cent of a vacant property’s assessed taxable value and an increase in property tax rates for homes assessed above $3 million. Sales of condos and townhomes have slowed, and the market is treating them with more caution.
As its economy diversifies, Ottawa is contemplating a bigger future. Local survey respondents viewed their market positively, third only to Toronto and Vancouver. With a new light-rail transit system and a focus on intensification, construction can be found in every corner of the city. What’s more, the proposed 21-hectare LeBreton Flats redevelopment, which includes a new arena for the Ottawa Senators, has the potential to transform the city’s downtown. “The city is setting the stage,” says one interviewee. “Someone needs to just pick up the ball.” The abundance of opportunities has led to some new entrants into the Ottawa market, but pricing and availability mean developers need to be diligent and focus on where they can add value.
Ottawa is experiencing growth and stability, aided in part by an expanding civil service and a thriving tech sector. Interviewees expect the job market will continue to flourish, and this, coupled with new investor interest and a growing flow of buyers relocating from expensive urban centres, will drive demand for housing. This is driving sales in infill communities in the city’s core and in the suburbs. Faced with a large inventory of condo units, many developers have switched to rentals, with many units coming online in the next 24 months, almost doubling the supply in some areas. Even with this increase, respondents anticipate rents will stay at an all-time high.
According to the CBoC, the city’s economy was poised to grow 2.8 per cent in 2018 and is forecast to expand 2.2 per cent in 2019. Revitalization of the city’s downtown core continues with construction of the MacEwan Centre for the Arts, construction of Edmonton’s ICE District and work on the new Valley Line LRT.
High inventories of new homes will cause starts in both the single-detached and multiple-unit markets to fall, with activity expected to rebound slightly in 2019, according to the CBoC. Over the last five years, home prices have risen by less than the national average – and interviewees said this discrepancy bodes well for future sales. The market consistency is good for sellers and presents an opportunity for Millennials who have been delaying entering the housing market.
Edmonton’s downtown condo market is getting a lift from Baby Boomers who are downsizing and moving into the city core. But the apartment rental market is experiencing high turnover as low interest rates entice some potential tenants to enter the housing market.
The CBoC expects Calgary’s economy to grow 2.3 per cent in 2019 after hitting 2.9 per cent GDP growth in 2018. Now that the city is seeing increased confidence as the oil and gas markets start its recovery, the wheels are in motion in the real estate market.
Even with increased interest rates and new mortgage rules, first-time and move-up homebuyers are leading the residential charge in multi-family residences and luxury homes, respectively. Meanwhile, Millennials and younger couples are balancing the condo market. For example, the East Village is a new city-supported community development, with condo and rental accommodations alongside retail and other cultural amenities. But Calgary’s housing market remains broadly oversupplied.