Summary

The Canadian residential real estate market softened in 2018, as a result of new and expanded government tax measures. However, the market experienced a rebound in 2019. Toronto’s residential real estate market is also expected to fully recover after the sluggish two years, according to the Canada Mortgage and Housing Corporation. High employment, the influx of immigrants, and migration from other provinces are driving the Toronto housing market. Furthermore, economic drivers, such as employment, growth in the working population, and increasing income, are expected to enhance the growth of the housing market in Canada.

With an overall residential rental vacancy rate of 0.9%, increased population, and rising employment opportunities, it is expected that there will be an increase in rental development and the residential rents may rise. Municipalities with business-friendly development incentives, including certainty of development costs and accelerated permit timelines, are also likely to benefit and experience growth in the development for residential products.

The Canadian government has also introduced new measures aimed at improving housing affordability across the Greater Toronto Area, like the “Housing Now” plan, which was approved by the Toronto City Council in 2019. The program is the first stage of a government initiative to build 40,000 new affordable residential units over the next 12 years. The first phase of the project has already begun, with the construction of 10,000 units across 11 municipally owned sites. The city will offer USD 280.0 million in incentives to ensure that one-third of the new units will be allocated as affordable, and the remaining two-third of the units will be split evenly between market rental and condo offerings.

Key Market Trends

Improving Affordability of Home Buyers Due to Declining Housing Prices in Western Canada

The decline in housing prices in the western regions of Canada, such as British Columbia, Alberta, Edmonton, and Calgary, has improved the affordability of homebuyers in the region. As per market reports, housing affordability improved in the first two quarters of 2019, owing to modest price drops in both Atlantic and Western Canada and rising household income, which contributed equally to the improved affordability.

The affordability measure improved by 0.2 percentage points to 51.3%, in 2019. The measure is calculated as a share of household income. A lower number means that buying a home is more affordable. The market recovery in the Toronto area has also gained momentum and supported a gradual price acceleration. Regions, like Ottawa and Montreal, are witnessing tight demand-supply conditions. Vancouver’s housing market also witnessed one of the largest prices declines, with the median price expected to be falling by 5.5% by the end of 2019 compared to 2018.

There's a high proportion of ownership-capable families in Canada's most affordable markets, namely St. John's, Regina, Quebec City, and Halifax. With interest rates no longer poised to increase and a still-positive outlook for household income, experts expect a further slight improvement in Canada's overall housing affordability picture in the near future.

Rising Demand for Houses in Cities, like Toronto

New home construction and sales activity are likely to increase in key cities of Canada, especially in the high-rise sector.

Toronto housing sales are anticipated to increase to between 83,400 and 92,400 in 2020, up from between 79,400 and 86,985 in 2018. Sales in the Toronto region jumped 22% in 2019 to 7,825 units, as per the Toronto Real Estate Board.

All the housing segments witnessed double-digit growth in the sales; however, detached homes led the category by a 29% increase in the sales' growth. The detached real estate sales made a very large climb in the first half of 2019 with nearly 3,618 housing unit sales, an increase of 20.55% from 2018. The new listings for detached real estate were also reported to be 6,216 in August 2019, up from 0.79% from 2018.

Competitive Landscape

The report covers some of the major players present in the Canadian residential real estate sector. In terms of market concentration, the real estate sales and brokerage industry in Canada has a comparatively low level of concentration. The Canadian residential real estate market presents opportunities for growth during the forecast period, which is expected to further drive the market competition. Some of the major companies in the market include BC Housing Management Commission, Aquilini Development, Concert Properties Ltd, and Century 21 Canada.

Additional Benefits:

The market estimate (ME) sheet in Excel format
3 months of analyst support

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