3 Real Estate Trends for 2020

The Canadian Real Estate Association recently updated its forecast for the coming year, and it appears that housing prices are going to continue to improve in many parts of the country. This is good news for the more than one million Canadian households that are likely to buy or sell a residential property over the course of the year.

That said, while many indicators point to a strong 2020 housing market in places like Montreal, Toronto and Vancouver, the trends are not necessarily uniform across Canada. Every city and region will have its own opportunities and challenges to confront, with the Prairie provinces, Newfoundland and Labrador facing somewhat greater difficulties than their provincial neighbours. 

Overall, the Calgary area will not grow as quickly as some other Canadian regions, but there are indications that the Alberta housing market may have hit its price floor, meaning things may be looking up in the second half of 2020. 

1. Rising Prices

Many housing market indicators are pointing in a positive direction country-wide, including population and employment growth, rising consumer confidence and low unemployment. With sales rising over the last half of 2019 but the number of new 2020 listings dropping, the market is tightening up, which bodes well potential overall price gains.

Another factor at play is the Bank of Canada’s decision regarding interest rates, which are generally understood to affect markets by determining the availability of funds, in turn affecting the cost of mortgage rates overall. The Bank of Canada is not expected to raise rates in the near future, and as far as the Calgary housing market is concerned, PWC expects to see moderate growth over the next few years, with rates averaging as high as 2.5% between 2020 and 2023.

However, if 2020’s trends are similar to those seen in 2019, we may see small declines in housing prices across Alberta, Saskatchewan and Newfoundland and Labrador, balanced by solid price gains in Ontario, Quebec and the Maritimes. Only time will tell.

2. Maturing Millennials 

Although there is no official, objective definition of the term, generally speaking millennials are those Canadians born between 1981 and 2000. Numbering 9.5 million people, this group of potential homebuyers now makes up the largest bloc of the Canadian working population (37%), an even larger percentage than the baby boomers, the group born between 1946 and 1965. 

Over the next decade, millennials will represent the largest share of the potential home buying market. Their current homeownership rate rests below the national average, and the gap may represent a promising area for improvement. That said, the jury is still out on the buying intentions of this up-and-coming generation, and there’s no telling if they will prioritize home ownership to the same degree as their forebears, or if they’ll be able to afford it regardless of their preference.

One element that might affect this group’s home-buying capacity is the Canadian government’s launch of the First-Time Home Buyer Incentive late last year. This $1.25 billion shared equity program is designed to help qualified first-time homebuyers reduce their monthly mortgage payments, and does so by providing a sum of between 5% and 10% of the home’s purchase price as a down payment. 

3. Ownership Affordability Down

While the price of buying a home has continued to increase year on year, these increases have occurred at a faster pace than wage growth in the vast majority of markets. In other words, in most regions it has become more difficult to purchase a home over time, and this trend continues. 

This will likely buttress an already vibrant housing rental market, and the high prices may lead to home buyers eventually abandoning what might be termed “top-tier” housing markets in favour of “second-tier” cities, where the prices are friendlier. This investment pattern is likely to drive solid price growth in these regions, as both homebuyers and even large corporations migrate to locations where the prices are friendlier.

Net-Positive News

In the end, while the real estate market is a bit of a mixed bag for 2020, with a healthy labour market, increased demand for housing, low interest rates and helpful government initiatives pointing to favourable housing prices in 2020. 

That said, the decline in home ownership is still a concern, as are lower vacancy rates in the rental market. In addition, some lenders have more stringent standards than in years past, requiring borrowers to save more for down payments and to improve their credit scores. 

All in all, we expect to see more buyers entering the housing market, continued low interest rates, and slow but steady growth in prices over the next few years, with some areas of the country booming more than others.