Slower Growth Points to Continued Soft Landing in Condo Market

Conference Board of Canada Summer 2015 Metropolitan Condo Outlook

TORONTO, Sept. 2, 2015 /CNW/ – Slowing GDP and job growth will have a moderating effect on Canada’s condo market, easing fears of overheating markets and further reinforcing the prospects of a soft landing, even as regional markets vary widely due to differing economic conditions according to the latest Conference Board of Canada condo report released by Genworth Canada.  The Summer 2015 Metropolitan Condo Outlook (the Report) forecasts that cities hit hardest by economic slowdown such as Calgary will experience ongoing reductions in starts, resale volumes and prices. However, Toronto, which has proven its ability to absorb newly completed apartments over the past few months, will cool gently; resale transactions and prices will increase only gradually. While Victoria and Vancouver will enjoy balanced markets, buyers’ markets will largely prevail elsewhere.

“The report findings continue to align with what we have described as a soft landing for Canada’s condo market for 2015,” said Stuart Levings, President and CEO of Genworth Canada.  “While conditions vary across markets, with greater cooling in oil-exposed regions, overall, the numbers point towards balanced resale activity which will support the safety and soundness of the condo market.”  

According to the Report, national real GDP is expected to fall to 1.5% for 2015 on the heels of 2.4% growth in 2014. Job creation is expected to rise only 1.1% in 2016 with the rate of unemployment holding steady at 6.9%. All eight cities covered by the Report are predicted to experience population growth in 2016 even in Calgary and Edmonton where the effects of slower GDP are most pronounced. Regional variations will continue to be significant as economic conditions vary widely by city. A key variable to monitor over the next year will be the successful absorption of inventories in cities across the country, but particularly in Toronto.

“Rapid increases in headline house prices have largely been driven by single- and semi-detached homes and row units in Toronto and Vancouver,” said Robin Wiebe, Senior Economist at the Centre for Municipal Studies at The Conference Board of Canada. “Price increases for apartments have been much less frothy.  Accordingly, nowhere do we see significant overvaluation of condo prices.”

Conference Board of Canada Summer 2015 Metropolitan Condo Outlook Regional Highlights:

• Québec City is expected to see decent economic growth and job creation in 2016, helping to spark a rebound in apartment starts for 2016. Falling new unit inventories should buoy the resale market in 2016, leading to a modest uptick in resale prices of 2.5%. Overall, the Quebec City market continues steady.
• Montréal is expected to see a steadily strengthening economy boost demand in the resale market during 2016 with sales forecast to rise 2%. Prices also expected to trend upward with a projected gain of 2.4%. Stubbornly high apartment inventories continue to plague Montréal; apartment starts are expected to pull back sharply in 2015 but falling unit completions this year should stabilize inventories and allow a modest 2.6% increase in starts in 2016.
• Ottawa is forecast to experience slightly improving economic growth and job creation over the course of the next year but apartment starts are expected to fall below 1,000 units for the first time in six years. Resale transactions are expected to rise by a modest 2.5% in 2016 with prices up a relatively understated 1.3%.
• Toronto’s population growth, healthy economy and decent job creation, point to a soft landing in Canada’s most active condo market. The area’s ability to efficiently absorb new unit inventories underpins this call, despite higher starts this year. Still, growth in resale volumes and price increases are both projected to ease considerably to 1.0% and 1.8%, respectively in 2016.
• Calgary’s economy has been hit hard in 2015 with the global slump in oil prices. A modest strengthening in economic conditions should spark slim improvements to the housing and condo market there in 2016 with prices having likely hit their trough. Although economic weakness will continue to discourage starts this year, a gradual rebound should nudge resale volumes and prices slightly higher in 2016.
• Edmonton may be over the worst effects of the oil patch slump but a rebound in the housing and condo market will not be immediate. Economic weakness is expected to cut starts in 2016, although resale transactions are expected to edge up 2% from a deep trough in 2015. The soft market should leave prices unchanged next year.
• Vancouver’s housing and condo markets are strengthening steadily with starts expected to rise 3.7% in 2015 and a robust 5.3% in 2016. Nevertheless competition from relatively high inventories of new condos is expected to shave resale volumes by 1.7% in 2016 and limit price growth to 2.7%. Recent weakness in the Chinese economy presents a downside risk to Vancouver’s housing market, since at least some the city’s housing demand originates in that country.
• Victoria’s condo market is experiencing a turnaround as employment strengthens and overall conditions improve. Absorption of new units has been strong, so starts should improve in 2015 before pulling back in 2016. Resale volumes and prices are forecast to tick upward at a moderate pace of 1.4% and 2.3% respectively in 2016.

Resale prices for condos are expected to be steady across the board with modest increases in 2016 for most of the cities covered in the Report. Not one single market is projected to suffer a resale price drop next year – although values will be flat in Edmonton and Calgary’s uptick will be a barely noticeable 0.1%. Vancouver and Quebec City are expected to lead the pack with 2016 price gains of 2.7% and 2.5%, respectively.  

Produced twice a year, the Metropolitan Condo Outlook is commissioned by Genworth Canada from the Conference Board of Canada. The Report reviews a wide range of condominium statistics and offers an in-depth analysis of the trends in the condominium market for eight large Canadian metropolitan areas: Québec City, Montréal, Ottawa, Toronto, Calgary, Edmonton, Vancouver and Victoria. A copy of the Report is available at http://genworth.ca/en/about-us/about-us-publications.aspx.

About Genworth Canada
Genworth MI Canada Inc. (TSX: MIC) through its subsidiary, Genworth Financial Mortgage Insurance Company Canada (Genworth Canada), is the largest private residential mortgage insurer in Canada. The Company provides mortgage default insurance to Canadian residential mortgage lenders, making homeownership more accessible to first-time homebuyers. Genworth Canada differentiates itself through customer service excellence, innovative processing technology, and a robust risk management framework. For more than two decades, Genworth Canada has supported the housing market by providing thought leadership and a focus on the safety and soundness of the mortgage finance system. As at June 30, 2015, Genworth Canada had $6.2 billion total assets and $3.4 billion total shareholders’ equity. Find out more at www.genworth.ca.

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SOURCE Genworth Canada