What city is poised for the busiest real estate activity in 2017? If you guessed Toronto or Vancouver, you’d be wrong. While Canada’s two biggest markets continue to scorch, Hamilton will actually be the hottest market in the country next year, according to the Re/Max Annual Housing Market Outlook Report.
Prices have surged nearly 20% in the region from 2015 – 16, and there’s no slowdown in sight. Prices are projected to grow another 11% to $595,000 in the Hammer next year – yet that’s still a relative steal compared to the country’s biggest markets.
In fact, buyers flocking to “regional” markets like Hamilton, Oakville, and Fraser Valley will be a long-term trend as affordability worsens in big cities, according to Re/Max, which states “move on” buyers seeking larger homes and lower prices will drive the market.
Tight City Conditions Drive Buyers to Suburbs
And it’s no wonder they’re leaving for greener pastures, as conditions are only expected to get worse within city limits – inventory of detached, semi-detached and townhouses within Toronto are at historic lows, while the average home price is projected to hit $783,926.
In an interview with the Toronto Star, Re/Max General Manager Cam Forbes said Toronto conditions will only be tighter this year. “We do see some decreased affordability next year… We’re not predicting a correction next year, but we are predicting a reduction in unit sales and still see an increase on price.”
In addition to Hamilton-Burlington, buyers also have their sights set on Durham region, which will see the strongest price growth in 2017. Other GTA markets such as Oakville, Brampton and Mississauga will see slight declines, as lack of supply limits buyer options.
Buyers headed to Smaller Markets Cross-Country
The surge in suburb popularity isn’t just limited to Ontario. On the west coast, Vancouver housing prices hit an average of $1,020,300 this year, with demand and prices to surge in Kelowna and Fraser Valley at 14% and 20%, respectively.
Alberta housing markets saw the least action as prices and sales were impacted by the province’s oil downturn – a decline in jobs, affordability and demand have led to a 2% price decrease in Edmonton, and 4% in Calgary.
Re/Max indicates Regina, Montreal, Saint John and St. John’s are the best bets for first time buyers seeking the most affordable housing as these cities are “offering a good selection of product to first-time and move up buyers.”
New Rules and Regulations to be Felt Next Year
Re/Max expects the slew of new rules and regulations introduced this year to take a bite out of the 2017 housing market, most notably the 15% tax levied on foreign buyers of Metro Vancouver real estate. Not only will it continue to cool sales and prices in the west coast city, but investors will increasingly look east for their real estate investment options.
“The ripple effect of the foreign-buyer tax can also be felt in the upper end of the GTA and Montreal markets, as some foreign investors are expected to look for properties in these regions rather than Vancouver,” states the report.
However, it doesn’t predict that recent mortgage qualification rules, which require buyers paying less than 20% down to qualify at the rate of 4.64%, will effectively dent buyer demand. “Measures taken by the federal government to tighten mortgage insurance criteria for new home buyers is expected to temper first time buyer activity across the country in the short term, but is not expected to have long-term impact in most regions,” it states.
Forbes expanded on this take for The Star, adding that Re/Max expects the government to take more action in the new year. “…We anticipate further measures by the government to tighten lending requirements,” he said. “Over the long run, you just don’t have 20% year-over-year price increases in the market, so there’s just no way they’re going to allow that sort of price increase to continue.”
Homeownership More Important than Ever to Canadians
Re/Max also polled 1,555 Canadians on their home buying sentiments for the report. According to their findings:
- 61% of Canadians own a home
- 53% of Canadians expect to buy a home – 47% say within the next five – 10 years
- 33% of buyers would look to alternative methods to finance their home
- 22% would rent out a room or income suite to help offset their mortgage costs
- 15% would use short term rental solutions such as Airbnb to improve their affordability