As far as the housing market goes, there are different expectations and
forecasts each and every year. Some years it is a buyer’s market. Some years
it is a seller’s market. Some years, what happens matches the guesses of
mortgage specialists exactly. Some years, it surprises us all.
Many people must consider the housing market – prospective buyers, real
estate brokers and experts, investors, fund managers, developers, property
companies, lenders, mortgage brokers, advisers, and consultants. Many say
that they have a feeling of unease as far as the housing market is
concerned. The reasons for this unease range from customer expectations
changing, preferences, policy changes and geopolitical uncertainty, and new,
modern business challenges such as labor shortages and cybersecurity issues.
But, thanks to CREA, (the Canadian Real Estate Association), we have some
idea of how the housing market will behave in the next year. But first, lets
talk about this year.
In 2019, the housing market was surprising to many. Mortgage rates fell,
which was the opposite of what the market experts have predicted. Home
buyers found it to be exciting news. Sellers found some good news from this
as well, as it was easier to sell their homes. Brokers benefitted from being
able to make their customers happy with lower rates. (However, some of the
expert’s predictions were correct! There was a short supply of homes and an
influx of too many buyers. In the last six months, mortgage rates have begun
to rise again.)
With that being said, what do the market experts predict for 2020? Lets
In September of 2019, The CREA (Canadian Real Estate Association) has
officially released it’s 2019-2020 forecast for the housing market – and
it’s good news! CREA expects home sales to total near 463,000 by the end of
2019. This will represent a 1.2% increase from the close of 2018. In 2020,
the CREA predicts sales will climb even higher, expected to rise 4.4%
annually, to total 483,200 homes changing owners.
This is partly thanks to measures taken in the 2019 Canadian federal budget.
To be called attention to is the First Time Home Buyer Incentive, a shared
equity program in which the federal government finances a portion of a home
purchase in exchange for an equity share of the home’s value, as well as
increasing the max RRSP withdrawal amount to $35K for the purchase of a
Also owed thanks for this good news is a strong economy as relates to
housing (especially outside of the Prairies and Newfoundland and Labrador).
Population and employment growth have been strong and increasingly
supportive. The unemployment rate remains very low. Expectations have become
that the Bank of Canada is unlikely to raise interest rates over the rest of
2019 and into 2020. Finally, stronger-than-expected housing market trends in
British Colombia and Ontario have played into CREA’s upward forecast as
well. These changes are forecasted to and meant to support a recovering
The general level of national home sales activity in the end of 2019 and the
start of 2020 is expected to remain below levels recorded prior to the
implementation of the B-20 stress test. (What is this? It is a new set of
regulations, determining what homebuyers can afford under worst-case
scenarios as opposed to an ideal state.)
As far as pricing goes, CREA forecasts that the average selling price of a
home in 2020 will be $485,000, which is down 0.6% year-over-year, before it
rebounds by 0.9% to an average of $489,000 by the middle of 2020. Price
trends are expected to be more moderate and less extreme versions of those
in 2019. There will be small declines in British Columbia, Alberta,
Saskatchewan, and Newfoundland and Labrador. There will be gains in all
other providences from Manitoba to the Maritimes!
Home sales have improved more than expected in the last few months and there
are some signs that in the near future, home price declines in the Lower
Mainland of British Columbia and across the Prairies may be abating.
However, in Ontario’s Greater Golden Horseshoe region, prices are
Also to be considered in 2020 are the new mortgage rules. If you’re
purchasing a home in a lower-priced city like Saskatoon or Charlottetown,
you may not feel much impact from the new regulations giving buyers a little
less purchasing power. However, if you buy in a more expensive area in 2020,
such as Toronto or Vancouver, every dollar will count. It may benefit your
family to buy a home outside the city, where dollars stretch further under
the new regulations.
There is, of course, more to consider than just the housing market.
Industrial real estate is one such field. This particular market has been
very healthy, boasting a low national vacancy rate, a national availability
rate of just 3.1%, and tight conditions in Vancouver (with a national
availability rate of 2.1%) and the Greater Toronto area (with a national
availability rate of just 1.5%). Renting rates continue to be on the rise as
well. Ware housing and fulfillment remain the top prospects for development
in 2020 – even now, the industrial market is tight.
Future development trends to watch out for include vertical warehouses and
fulfillment centers, requiring less space – so more can be built. Self
storage facilities are also expected to boom, as the average family home
Office buildings are rated fifth for development prospects in 2020. The
country’s continued gains in employment and quickly growing technology field
have been good news for the office sector. In the second quarter of 2019,
the national vacancy rate for office properties in the country was 10.5%.
As the internet’s capabilities expand, more and more people do their
shopping online. This has hurt the retail real estate market – property
types like outlet malls are at the absolute bottom of the list of
development prospects in commercial real estate. However, the rise of
e-commerce doesn’t mean the end of physical stores . Retailers may have a
smaller footprint in the real estate market, but they do still make the
With all that being said, where should investors and developers focus in
2020? The best places to look are, as reported, Montreal, Toronto, and
Vancouver. But what type of real estate is the best this year? Warehousing
and fulfillment are, as discussed, at the top of that list. Also to be
Mid-price apartments, which has ranked third in best developing prospects
for 2020. Canadian families are looking for affordable housing options, and
sometimes that does not mean buying a single family home. Instead, they
search for their housing in the multi-family rental category to get their
money’s worth. Even as condo construction booms, this area of the market
continues to hold strong – In 2008, only 13,947 units were under
construction. In 2018, that number raised to 56,394. That’s a huge increase!
Transit oriented development must be considered as well. In Montreal, the
development of the Reseau express metropolitan project is expected to grow
the real estate development along it’s route by five billion dollars. As
public transportation grows, so too will the demand for housing near where
it’s routes are for easier access to transportation by the public.
Data centers are an unexpected niche property type that has also made the
list of best developing prospects for 2020. They house key components of IT
infrastructure for many corporations, governments, and other organizations.
They require extremely specialized infrastructure as far as power
consumption, redundancy, and security is concerned. Global increase in
technology development has, understandably, raised need and interest in more
data centers. In fact, the data center section of the market boasted a
nearly 27% return in 2019! The positive demand (and growth of the internet)
certainly makes this a sector to watch in 2020.
Senior-only housing rounds out the best bets for investors and developers
for 2020. The demand for senior housing is high, and boasts a variety of
options for seniors wanting high levels of convenience, security, amenities,
and flexibility in their home lives. Despite the legal regulations and many
complexities that come with developing senior specific housing in this day
and age, this is still an area of the market to keep your eye on. After all,
we all grow old.
Thankfully, real estate will continue to perform well. There are very few
cases of over or under supply in any market, developers continue to see
opportunities to grow on, positive trends are becoming more common and more
sustainable, and we have been able to pinpoint certain areas of the market
where focus should be placed for the future. 2019 surprised us all, but as
we shift our focus to the next year, we would be wise to remember the
forecasts of the market experts in regards to expected trends in the real
estate market in the end of 2019 and the beginning of 2020.