CANADA – Despite the perennial speculations of a housing market crash, there is room for growth in the Canadian real estate market as investors are moving East and towards more mixed-use developments according to Emerging Trends in Real Estate® 2017, jointly released by PwC Canada and the Urban Land Institute (ULI). Canada seems poised for a year of stability regardless of concerns about a possible pullback in the Vancouver and Toronto housing markets.
According to the report, housing affordability, weak income growth, and high consumer debt levels are all contributing to the dip in residential sales in Canada. Compared to the previous year, the average price for housing is expected to decline by -0.9% in 2017 compared to a significant spike of 10.6% in 2016.
While Toronto and Vancouver will be hit the hardest by this downward trend in housing price, other markets in the East including Halifax, Ottawa, and Québec City are forecast to grow slightly.
The report highlights six important areas to watch for:
- Building Communities: Canada’s urban populations will continue to grow and their needs are evolving. Mixed-use projects combining residaential, retail and commercial parts continue to thrive and there’s a growing consensus that developers must do better when designing public spaces.
- Affordability on the decline: Housing affordability has become a major point of concern in Canada. In Toronto and Vancouver, mortgage-to-income ratios forecast to remain well above the Canadian average. Significant increases in immigration over the next five years will continue to keep demand high and put even more pressure on affordability unless more supply is made available, not just in Toronto and Vancouver but also across the rest of the country.
- Renting for the long-term: Attitudes toward renting are shifting and people are choosing to rent longer as they weigh the costs of homeownership against the benefits. It’s a trend that’s sparking ongoing interest in purpose-built rentals and raising questions about the size of units and the need for supporting infrastructure (e.g. schools, medical facilities, day care, etc.).
- Technology disruptors: Real estate firms must take significant steps to adapt to customers’ growing tech needs or risk falling behind and we’re seeing this in multiple sectors including office, retail and residential markets. Buyers and renters alike are increasingly expecting more energy-efficient properties and amenities, new systems in waste management and energy conservation. Customers now have access to more data online than ever before and development firms are harnessing the power of 3D conceptualization to create virtual tours, reducing the reliance on showrooms.
- Global uncertainties: While the domestic front has been stable, developers, investors, and property owners alike express concern over global political and economic uncertainties. Most believe that these uncertainties, along with the low Canadian dollar, will continue feeding demand for Canadian real estate; for now, Canada is seen to be a steady, low-risk place for investors to put their money.
- Oil/gas prices & waiting on deals: Slumping oil and gas prices continue to weigh on the economy, and they’re hitting Alberta hard. Oversupply of office space has not stopped some projects from being completed, but the Calgary market has hit the pause button. The impact on Edmonton’s real estate market has been softened thanks to the city’s more diversified economy and significant investments in redeveloping its downtown core.