TORONTO, Cananda – Even though the housing market is showing renewed strength overall, there are underlying differences in valuations and outlooks among Canada’s four major cities, according to a new report by the Bank of Montreal.
The study by BMO Economics found Calgary has the strongest major housing market thanks in part to a move west by immigrants and young Canadians, drawn by better job prospects, faster wage growth and healthier housing affordability than Vancouver and Toronto.
“Strong economic and population growth will encourage an upward trend in Calgary’s house prices, though higher borrowing costs will moderate the gains,” said Sal Guatieri, senior economist with the Bank of Montreal.
In the three months to October, Calgary home sales have run 23 per cent above year-ago levels, nearly twice the national rate, although some slowing is likely in November.
Sales in Toronto were up 20 per cent year over year, as new condo sales firmed after plunging last year.
Markets were for the most part balanced in the country’s largest city, but bidding wars were still the norm in some areas where listings are scarce.
“The looming supply of condos, high valuations of detached homes, elevated levels of household debt and moderately higher interest rates should slow overall price increases in 2014,” said Guatieri.
“We expect Toronto house prices to stabilize in 2014, and to remain at risk of declining moderately when interest rates normalize.”
The report also found Vancouver, often seen as the market most at risk of a correction, was returning to balance, although prices remained largely unaffordable.
“Affordability is still a challenge, with benchmark prices topping eight-times family income,” the report said.
“For young buyers, condos will remain an affordable option, as prices have fallen slightly in the past year and are little changed from six years ago.”
Montreal’s housing market was the weakest of the four major cities, as sales remained below past-decade norms.
But sales rose two per cent in the past year because of decent affordability and job growth, and an upswing in new listings has kept buyers in the driver’s seat in Montreal, unlike the other major cities.