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Real Estate Market Update: May 2017

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Having moved into the second quarter of 2017, there’s much speculation about where the real estate market is headed. The key changes in the past 3 months have been:

1. 2017 Federal Budget favours the housing market

On March 22 Bill Morneau, Canada’s Finance Minister, tabled his budget for the upcoming year. Among the proposed measures, the rumours of an increased capital gains inclusion rate (from 50 to 70 per cent) did not materialize. Neither did any new mortgage tightening measures.  The changes with an impact on the housing market worth mentioning were a national housing strategy investing $11.2 billion into building, renovating and repairing Canada’s affordable housing stock, and an implementation of a national housing fund for vulnerable populations (seniors, First Nations, people with disabilities, etc). This fund amounts to $5 billion over 11 years. Lastly, the budget also allots $39.9 million to Statistics Canada over the next five years, and $241 million to the CMHM over 11 years, with the goal of creating a new database for housing statistics. Deeper statistical insights are required to determine the degree and  impact of foreign ownership, as well as to collect geographical data on homeowner finances and demographics.

2. Growing home sales and a healthy economy

Desjardins’ recent resale housing market forecast, published on March 23, forecasts a 2.3% growth rate for existing home sales in 2017, reaching 80,000 by the end of the year. Quebec’s low unemployment rate (the lowest in 40 years) and a growing after-tax income is expected to contribute to a health real estate market. Desjardins also expects a 3.5% annual rise in the average price of properties in Quebec.

As for new single family housing starts, Desjardins predicts a 6.9 per cent jump, reaching 16,500 units. As the condo surplus is slowly reabsorbed, the condominium market will also see an increase in housing starts this year.

3. Current market stats and averages

The Canadian Real Estate Association’s (CREA) housing market statistics indicate that 37,379 residential properties were sold in Canada in February 2017. This figure represents a 2.6% decrease as compared to the same month last year. Canadian average home prices (excluding the Vancouver and Toronto markets) reached $369,728. Quebec-specific Centris stats by the end of the first quarter noted 21,494 sales, 44,319 new listings, 75,156 active listings, and a $240,000 median price for single family homes ($222,000 for condos). Meanwhile according to their own data, the CMHC announced 2,141 new housing starts in Quebec centres in the month of February 2017. This represents a 17% increase relative to February 2016. Montreal GMA say a 48% increase in housing starts in February 2017.

4. Notable growth in the vacation home segment 

The QFREB has recorded 3,434 holiday home sales in 2016 in the Laurentides, Montérégie, Capitale-Nationale, Estrie, Lanaudière, and Outaouais administrative regions. Of these homes, 3,024 were single family properties, an increase of 13% relative to 2016. Condo vacation home sales did not fare as well, with a 3% drop to 411 units. In 2016, Laurentides was the dominated this market segment, with 1,299 vacation properties sold. The strength of the vacation home segment is accounted for by an increase in job creation (36,200 new jobs in 2015-2016), of which 28,000 were created in Montreal. This contributes to a high consumer confidence and a willingness to invest into a second home. Another contributing factor is the weakness of the Canadian dollar compared to the US dollar, the Euro and the Yen. This may have encouraged more foreign buyers to purchase holiday homes in the Canadian countryside.

 

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