Montreal Home Price Growth to Surpass All Major Cities in 2019 as Canadian Housing Correction Continues

• Economic, regulatory, and political headwinds to cool home price appreciation across Canada
• Greater Toronto Area to see home prices increase 1.3% at the end of 2019
• Greater Vancouver home prices forecast to increase 0.6% at the end of 2019
• Ottawa home prices forecast to increase 2.5% at the end of 2019
• Home prices in Alberta and Saskatchewan expected to depreciate due to weak oil sector

TORONTO, Dec. 11, 2018 /CNW/ - According to the Royal LePage Market Survey Forecast¹ released today, home prices across the country are expected to appreciate at a low single digit rate in 2019. Nationally, the price of a home is forecast to increase slightly by 1.2 per cent to $638,257. In the Greater Toronto Area (GTA), the real estate market is expected to make modest gains with home prices also rising 1.3 per cent to $854,552. In Greater Vancouver, home prices are expected to remain relatively flat, as the median price is forecast to increase only 0.6 per cent to $1,291,144. When comparing major metropolitan regions nationwide, the median price of a home in the Greater Montreal Area is expected to see the largest gains, with home prices expected to rise by 3.0 per cent to $421,306.

"Markets aren't perfect. They overshoot and then they must correct," said Phil Soper, President and CEO, Royal LePage. "The Canadian housing market in 2019 will remain in the correctional cycle that began in 2018, where price gains and sales activity are below the long term norm, after a few years of uncomfortably high major market price increases. This is a Canada-wide statement, and of course our huge nation is a market of markets. To provide insight that is useful for consumers and business planners alike, our forecasting is both nationwide and region by region."

"I would call attention to two factors influencing our forecast that deserve special consideration. Firstly, home prices are appreciating, albeit at a snail's pace. Secondly, the Canadian market is supported by strong economic fundamentals, including a robust rate of new household formation and excellent employment growth. The future for Canadian housing remains bright, perhaps too bright. With an increasing number of gainfully employed people looking to put a roof over their heads, and the scarce availability of rental accommodation, policy makers in our major markets will once again be struggling with housing shortages. More than an affordable housing problem, we will once again be facing an overall housing supply crisis," said Soper.

The 2019 market owes its tepid pace to a host of uncertainties beyond the price overshooting of recent years. This includes slowly rising interest rates, global trade risks, the persistently low price of Canadian export oil, and regulatory intervention, particularly in British Columbia.

On December 5, the Bank of Canada announced that it will not increase its benchmark interest rate of 1.75 per cent citing a weaker than expected energy sector.² While further rate increases are expected in 2019, maintaining current rates bodes well for current home buyers aspiring to maximize what they can afford.

Soper continued, "Demographic shifts and immigration will put increasing pressure on limited housing supply in the coming years. Our research into the buying intentions of the huge peak millennial group, Canada's 25-31 year-old first-time homebuyers, shows that most plan to own their homes. Financially capable immigrants from around the world, including the United States, are drawn to our high-functioning country in greater numbers each year. And the baby-boomer tipping point has finally been reached. According to Royal LePage research, many in this large cohort of homeowners say that they are ready to trade oversized family homes for dwellings more suited to their new circumstances."

The Bank of Canada has forecast that GDP will increase 2.1 per cent in 2019,³ a modest increase over 2018, while Canada's unemployment rate fell to 5.6 per cent in November, the lowest on record since 1976.⁴

"Quebec will out-perform the nation in 2019," concluded Soper. "Like other regions of the country, the economy is strong and people are working. What is different is affordability. We have to remember that Montreal sat-out the rapid home price inflation we saw in Vancouver and Toronto this decade, and in Calgary the decade before. Activity will be muted in our energy-producing regions for at least another year on transport challenges and worldwide over supply. And Winnipeg, Ottawa and Halifax, our moderate growth, Goldilocks cities, will continue to chart a comfortable middle course, not too hot; not too cold."

Regional Price Forecasts

Greater Toronto Area
The median price of a home in the Greater Toronto Area is forecast to increase 1.3 per cent in 2019, rising to an aggregate price of $854,552. The modest expectation in price growth is supported by the region's expanding population, a healthy economy and a continuation of years of pent up demand due to low inventory.

"Compared to the record pace of home appreciation seen in 2016 and 2017, the GTA housing market is now positioned for much healthier and sustainable growth in future years," said Chris Slightham, broker and owner, Royal LePage Signature Realty. "Potential home buyers who were shut out of the market have an opportunity to catch up and we are expecting increased sales activity this spring compared to last year."

Many regions outside of the city's core saw price declines in 2018, a result of overshooting in previous years. The continued population growth should cause the suburbs to stabilize and reignite price growth. In addition, the potential subway expansion into the suburbs should stabilize and increase home prices in close proximity to new transit infrastructure.

Slightham added that he expects prices and sales activity in the detached home segment to firm in 2019.

Greater Montreal Area
In the Greater Montreal Area, the median price of a home is forecast to increase 3.0 per cent at the end of 2019, rising to an aggregate price of $421,306. With one of Canada's best performing economies, an historically low unemployment rate and renewed confidence in trade south of the border with the new Canada-United States-Mexico Agreement (USMCA), the Greater Montreal Area real estate market sits atop Canada's major cities for projected growth.

"With healthy price increases projected in 2019, we're forecasting the housing market in the Greater Montreal Area to outperform other Canadian urban centres," said Dominic St-Pierre, Vice President and General Manager, Royal LePage, for the Quebec region. "Montreal is a great place to live and work. Would-be buyers are seeing home prices increase and they want to purchase while homes remain affordable."

Citing Quebec's consumer confidence index which fell in November below the last five-year proportion for the first time since January 2017,⁵ St-Pierre believes that home price appreciation and sales activity in the new year will accelerate at a slower pace than in 2018 in the region, and across the province in general. This trend could be further amplified if immigration levels are reduced through government intervention.

"While previous interest rate hikes by the Bank of Canada and the tightened 2018 OSFI mortgage rules spared the province's real estate market in 2018, we may see some effects in 2019 as more homeowners renew their mortgage loans," said St-Pierre. "On the upside, this should help stabilize inventory. We anticipate a 2.0 per cent increase in sales in the Greater Montreal Area."

Greater Vancouver
In Greater Vancouver, the median price of a home is forecast to increase 0.6 per cent in 2019, rising to an aggregate price of $1,291,144. While British Columbia's economy is expected to perform well in the new year, federal and provincial government intervention, low affordability and rising interest rates will continue to weigh on home prices.

"The OSFI stress test, coupled with provincial tax policies, will continue to affect the real estate market in 2019. The possibility of rising interest rates will also keep some potential buyers on the sidelines as they wait to see how higher rates impact the market," said Randy Ryalls, broker and manager, Royal LePage Sterling Realty. "For potential buyers whose purchasing ability is not limited through mortgage regulation or financing, the buying opportunities in Vancouver are excellent." 

Ryalls added that while home prices will remain relatively flat in 2019, the region's healthy economy, excellent lifestyle and its beautiful natural surroundings will continue to support the real estate market in the long-term.

Ottawa
The median price of a home in Ottawa is expected to increase 2.5 per cent in 2019, rising to an aggregate price of $487,910. Ottawa's real estate market will continue to benefit from the city's healthy economy and high income per household, driven by the public and technology sectors.

"Ottawa's real estate market continues to be strong," said John Rogan, broker of record, Royal LePage Performance Realty. "We're still seeing multiple offers on well-priced properties in popular neighbourhoods. Demand is expected to remain strong, which could lead to a further inventory shortfall during 2019."

Rogan noted that neither the new mortgage rules implemented by the Office of the Superintendent of Financial Institutions or recent interest rate hikes have notably affected Ottawa's housing market.

Calgary
The median home price in Calgary is expected to decrease 2.3 per cent to an aggregate price of $473,104 at the end of 2019. Persistently weak oil prices have continued to weigh on the real estate market resulting in lower consumer confidence. Reduced affordability from recent interest rate hikes and the 2018 OSFI mortgage regulations are expected to continue to negatively impact price appreciation and sales activity in 2019.

"Until consumers adapt to mortgage rules changes, and full-time employment rates increase, Calgary's real estate market will not see notable price gains. In 2019, we are expecting a modest price decline as a result of high inventory and weak demand. Saying that, vacancy rates have declined, which may prove to be an opportunity for investors and landlords considering a move to Calgary," said Corinne Lyall, broker and owner, Royal LePage Benchmark.

While the oil sector is the most significant economic factor in the region, there are some positive trends emerging that are supportive of stable home price appreciation. The City reported positive in-migration in 2018,⁶ which is a reversal from previous years as workers left for employment in other provinces.

Edmonton
The median home price in Edmonton is forecast to decrease 1.9 per cent to an aggregate price of $378,691 at the end of 2019. As with Calgary, the effects of low oil prices have impacted all areas of the provincial economy, including real estate. Jobs related to all streams of oil extraction, transportation and distribution are being cut, reducing confidence in the real estate market.

"Regardless of the uncertainty in the energy sector, home prices in the city remain affordable and attractive compared to other regions in Western Canada", said Tom Shearer, broker and owner, Royal LePage Noralta Real Estate. "Buyers will have a great opportunity in 2019, especially at the beginning of the year, to purchase a new home while inventory is high and competition is relatively low."

Shearer added that the new mortgage stress test rules reduced buyers' purchasing power by about $100,000 in Edmonton.

"The OSFI 2018 mortgage rules will continue to weigh on home prices in 2019," said Shearer.

Winnipeg
The median price of a home in Winnipeg is expected to increase 1.3 per cent in 2019, rising to an aggregate price of $309,829. The region's healthy and diverse economy coupled with immigration is expected to put upward pressure on home prices next year. 

"Winnipeg's real estate market is expected to be fairly balanced in 2019," said Michael Froese, managing broker, Royal LePage Prime Real Estate. "While Winnipeg is poised to be one of the strongest economies in 2019, we are still seeing the effects of the OSFI mortgage rules introduced in 2018 and there is concern among buyers for potential further interest rate hikes."

According to Froese, another factor that could impact Winnipeg in 2019 is the federal election.

"In previous election years, Winnipeg's real estate market took a significant pause as a result of the uncertainty elections create," said Froese.

Halifax
The median price of a home in Halifax is expected to increase 1.6 per cent in 2019, rising to an aggregate price of $326,096. This increase reflects the region's healthy economy and its ability to attract immigrants and Canadians from other provinces.

"This year was a good year for the Halifax real estate market, which absorbed the impact of OSFI's 2018 mortgage stress test fairly quickly," said Marc Doucet, broker of record, Royal LePage Atlantic. "Halifax is one of the best places to live in Canada and homes are very affordable. In 2019, the market's balanced inventory should continue to drive healthy price increases."

In addition to price gains next year, Doucet added that he expects brisk sales activity in 2019.

Regina
The median price of a home in Regina is expected to decrease 4.7 per cent in 2019 to an aggregate price of $311,505. Saskatchewan's real estate market has been negatively impacted by the broader economic slowdown caused by weak commodity prices.

Housing inventory in Regina remains high despite the significant decline in new home starts, which has led to a supply and demand imbalance in the market that has added to downward pressure on prices. However, the region remains an attractive destination for immigrants, which may help to buoy the market in 2019.

"The challenges that plagued the Regina real estate market in 2018 may have 'touched the bottom' on our localized recession.  Provincial GDP and hiring trends indicate that we may see a rebound by the second quarter of 2019," said Mike Duggleby, broker and owner, Royal LePage Regina Realty. "Those looking to buy are finding excellent selection, reduced competition from other buyers and affordable prices."

Royal LePage Market Survey Forecast

Region	2018  Aggregate Home Price (Year End Estimate)	2019 Aggregate Home Price (Forecast)	Year-over-Year (%)
Canada	$631,000	$638,257	1.2%
Greater Toronto Area	$844,000	$854,552	1.3%
Greater Montreal Area	$409,000	$421,306	3.0%
Greater Vancouver	$1,283,000	$1,291,144	0.6%
Ottawa	$476,000	$487,910	2.5%
Calgary	$484,000	$473,104	-2.3%
Edmonton	$386,000	$378,691	-1.9%
Winnipeg	$306,000	$309,829	1.3%
Halifax	$321,000	$326,096	1.6%
Regina	$327,000	$311,505	-4.7%

About the Royal LePage Market Survey Forecast
The Royal LePage Market Survey Forecast provides year-over-year price expectations for Canada's nine largest markets. Housing values are based on the Royal LePage National House Price Composite, produced through the use of company data in addition to data and analytics from its sister company, RPS Real Property Solutions, the trusted source for residential real estate intelligence and analytics in Canada. Commentary on housing and forecast values are provided by Royal LePage residential real estate experts, based on their opinions and market knowledge.

About Royal LePage  
Serving Canadians since 1913, Royal LePage is the country's leading provider of services to real estate brokerages, with a network of more than 18,000 real estate professionals in more than 600 locations nationwide. Royal LePage is the only Canadian real estate company to have its own charitable foundation, the Royal LePage Shelter Foundation, dedicated to supporting women's and children's shelters and educational programs aimed at ending domestic violence. Royal LePage is a Brookfield Real Estate Services Inc. company, a TSX-listed corporation trading under the symbolTSX:BRE.

For more information visit: www.royallepage.ca. 

^1	Aggregate prices are calculated using a weighted average of the median values of all housing types collected. Home price data is provided by RPS Real Property Solutions.
^2	Bank of Canada, Press Release: Bank of Canada maintains overnight rate target at 1 ¾ per cent, December 5, 2018
^3	Bank of Canada, Monetary Policy Report, October 2018
^4	Statistics Canada, Labour Force Survey, November 2018
^5	Quebec Federation of Real Estate Boards' economic news, Nov. 22, 2018.
^6	City of Calgary, Fall 2018 Calgary and Region Economic Outlook, October 2018.

SOURCE Royal LePage

Angela Pinzon, Kaiser Lachance Communications, 647-295-0517, [email protected]