TORONTO – Rising interest rates and slowing job growth will temper Canadian home sales this year and into 2014, while a new supply of condos coming onto the market over the next two years will depress prices in that segment, Scotiabank says.
“Canadian housing activity remains buoyant, though the underlying fundamentals for continued gains are becoming less favourable,” according to the bank’s Global Real Estate Trends report, published Wednesday.
“Low borrowing costs and balanced market conditions continue to attract buyers, though slowing job growth and the recent uptick in fixed mortgage rates will likely cool activity later in the year and into 2014. Affordability also is challenged in some of Canada’s largest urban centres, primarily for single-family homes.”
Housing construction will slow as a result, with starts expected to fall to about 170,000 units next year, Scotiabank says in its Global Real Estate Trends report.
The Scotiabank report, which is consistent with other industry data, also raises concerns about an oversupply of condominiums in major Canadian cities as demand for new units weakens.
For example, in Toronto, purchases of new units have fallen sharply over the past year, as expectations of lower returns have made condos less attractive investments.
However, the report notes that condo resales – a market that is dominated by buyers who want to live in the unit they’re purchasing – have been holding up in Toronto. Despite the slowdown in construction, Scotiabank says a record number of new condo units will come onto the Toronto market over the next two years. The supply is expected to exceed demand and to reduce condo prices
The report notes that imbalances are also beginning to appear in the Montreal and Vancouver condo markets, and builders are responding by slowing down the pace of new construction of multiple-dwelling units. New apartment starts were down 30 per cent in Montreal and 10 per cent in Vancouver this year, the report says.
Source: Stock House.com