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In a report published this week, PricewaterhouseCoopers (PwC) released some predictions for Canada’s housing market, based on the results of an extensive industry survey. The study finds that, “investors, developers and property owners are cautiously optimistic about the Canadian real estate market’s outlook for the year ahead.” The hot markets; Toronto and Vancouver, continue to experience high demand and low supply. This has driven up prices and caused affordability concerns. However, every regional market offers opportunities for savvy developers and investors—as long as they embrace technology and anticipate their future buyers’ needs.
Here is a summary of PWC’s findings:
Shifting community structures
From baby-boomers to millennials, Canada’s demographic populations continue to grow, and their needs are evolving. Mixed use buildings – projects combining residential, retail, and commercial components, are foreseen to play a more important role in the coming year. Developers have picked up on the growing popularity of these buildings, and have responded by continuing to rethink and further develop their approach to mixed-use projects.
Housing affordability has become a point of concern in several markets in Canada. Natural growth and immigration over the next five years will keep demand high, putting even more pressure on affordability unless more supply is made available. Red tape and lengthy approval processes also contribute to limiting supply and driving up costs, in most regions covered by the study.
Technology is changing expectations, as well as the nature of communication between tenants, landlords, sellers, buyers, and brokers. The consensus amongst respondents was that tech is now essential in the real estate industry, and if we aren’t learning to harness and integrate it into our interactions, then opportunities are being missed.
Canada’s economic performance appears to have rebounded from a weak 2015. The country’s economy continues to realign itself in the wake of falling oil and other commodity prices, as job losses in the natural resources sector have been offset by employment gains in manufacturing and construction. According to the Conference Board of Canada’s Metropolitan Outlook 1, Spring 2016, national GDP is forecast to grow to 1.7% in 2016 and 2.3% in 2017—and stay above 2% through 2020.
Decline in residential housing starts
Housing starts nationally are forecast to fall to 184,500 units in 2016, down from 194,700 and below the 20-year average, according to the Conference Board of Canada. Housing affordability, weak income growth and high consumer debt levels all contribute to the dip in residential starts.
Montreal specific predictions
Montréal’s economy is poised to achieve its best growth in five years, with manufacturing, financial services, and business services all having a healthy outlook. The region’s GDP is projected to stay at a stable 2% in 2016 and 2.1% in 2017, according to the Conference Board of Canada. Despite high vacancy rates for office space—11% down-town and 17% in the suburbs as per the Conference Board of Canada—demand for Leadership in Energy and Environmental Design (LEED) certification and upgraded technology remains high.
Montréal continues to absorb the city’s condo stock, and “pure” condominium plays have given way to mixed-use developments. More of these are on the horizon, especially around transit hubs, and the trend is increasing cooperation between investors and developers.
Parts of this article were sourced directly from PWC’s report.