Where Is The Market?

Home prices were relatively flat during 2015. A lower Canadian dollar and U.S. economic growth should fuel service and manufacturing sector dynamism in 2016, improving employment levels and consumer confidence, and providing a lift to home prices.

“Montreal’s slow-growing real estate market is expected to be much more vigorous in 2016,” said Soper. “A recent economic opportunity study pointed to Montreal as Canada’s third ‘city to watch’ in 2016, just behind Vancouver and Toronto in growth potential.”

Montreal’s […]real estate market is expected to be much more vigorous in 2016

In 2016, Royal LePage expects the price of residential real estate in Canada to be more heavily influenced by macroeconomic factors than by housing-specific variables such as tighter regulations in the mortgage industry. The Bank of Canada is expected to keep its overnight rate steady throughout the spring market, extending the prolonged period of exceptionally low borrowing rates. While the new Federal Minister of Finance kicked off his appointment with a10% hike in the minimum down payment required for the portion of mortgage insurance over $500,000, Royal LePage expects this change to have a marginal effect on the overall market.

“The new federal government moved quickly with a policy change in the minimum down payment required to secure mortgage insurance,” said Soper. “The clever public policy argument here is that the government-backed program, provided primarily as assistance to the first-time homebuyer, should be more expensive for people insuring very large mortgages. The change will produce an added benefit akin to a slight tap on the brake for our two most costly cities. On a nationwide basis, we expect the number of transactions that this will impact to be minimal.”

The global economic picture continues to be uneven. For the most part, forecasters such as the International Monetary Fund expect worldwide growth in 2016 to be close to the modest levels attained in 2015. Asia remains a wildcard, as evidenced by the recent gyrations in China’s stock markets. If China’s economy continues to sputter, Canada’s second largest export market could reduce the quantity of goods and services that they purchase, creating drag on our economy.

Offsetting the dampening effects of a troubled global economy and oil price declines, the economic rebound and hiring surge in America presents a meaningful opportunity for Canadian export growth. Canadian export volumes to the U.S. are twenty times larger than export volumes to China. Combined with the relatively weak Canadian dollar, which attracts foreign buyers, Royal LePage expects to see expanding export activity in Ontario, British Columbia, Quebec and Manitoba.

In the manufacturing sector, a recent report from Export Development Canada noted that exporters will ride the wave of surging demand in the U.S., as evidenced by vehicle sales climbing above pre-recession levels.
“Canada will benefit more than any other country in the world from the ‘made in America’ recovery underway south of the border. It took seven long years, but the incredible U.S. jobs creation machine is finally running at full tilt, and those newly confident people want what we have to offer. Growing exports mean more jobs and, by extension, stronger Canadian consumer confidence. Combined with continued low interest rates, the country’s housing market is in a solid position to weather the impact of low commodity prices and a choppy domestic economy,” concluded Soper.

In the Greater Montreal Area, the housing market saw moderate growth with the aggregate price of a home in the region, rising 2.3% to $340,207. The median price for a bungalow saw a moderate 2.0% year-over-year increase to $281,154, while two-storey homes saw a 3.3% increase to $435,586. The median price of condominiums remained relatively flat, rising 0.4% to $283,050. Royal LePage predicts that properties in the Greater Montreal Area will see a 1.8% price increase in 2016.