Four housing markets to watch in 2014

This year was full of pleasant surprises in Canada’s housing market as sales recovered from the more stringent mortgage rules introduced by the federal government in 2012, says Sal Guatieri, senior BMO economist in a special report.

Calgary

This city continues to be the strongest major housing market in the country, says Guatieri. There are few houses, new or old, on the market, so sellers have an advantage. Prices have risen 8% year over year, nearly recovering from the losses of the financial crisis. The cost of housing is relatively reasonable as Calgary-area wages are also rising, he adds.

“The population of prime first-time home-buyers (aged 30 to 44 years) is growing 5.2%, nearly five-times faster than the national rate,” notes Guatieri in the report as Alberta attracted a record number of young Canadians and international immigrants in 2013.

Energy exports also make Alberta the only province whose GDP is likely to grow more than 3% in the next two years.

“Strong economic and population growth will encourage an upward trend in Calgary’s house prices, though higher borrowing costs will moderate the gains,” says Guatieri, who adds the Bank of Canada is expected to raise interest rates in 2014.

Read: Calgary new home prices rising fastest in country

Toronto

The largest city in Canada continues to be the country’s largest housing market, taking up 19% of national sales. The local real estate market saw increased sales of 20% between August and October of this year.

While Toronto may look lie it’s in a condo boom, there haven’t been enough built in the last seven years to keep up with population growth, says Guatieri. But he still predicts a slowdown in the housing market because of the predicted interest rate hike in 2014.

Read: Toronto’s economy to score big with Pan Am Games

Vancouver

After its housing market took a dive in light of the new mortgage rules, Vancouver’s sales have recovered to near-normal levels.

While buyers had an advantage last year, in 2013 the power swung back to sellers.

The city is notorious for its unaffordable housing market, with prices equivalent to eight times the average local family income. Buyers of detached houses will experience some relief, predicts Guatieri, but the prices won’t fall far as supply of these homes is tight.

Condo prices have actually fallen slightly in 2013, and are similar to 2007 prices. Prices won’t rise next year, he adds.

Read: Homeownership slipping away from more Canadians

Montreal

Sales in this city are still 9% under the decade norms, but they have improved, says Guatieri. Buyers enjoy the upper hand here as there are many new home listings, especially new condos.

It’s also affordable to buy in Montreal: an average two story detached home in the city costs $382,000, compared to $565,000 in Toronto and $1,030,000 in Vancouver. Montreal prices will be much the same in 2014.

Read: 90,000 new jobs in Montreal by 2016: BMO