I like to make predictions. I think I’m usually right, and for the record usually a little conservative when it comes to price rises and sales volumes predictions. Cautiously optimistic is about as optimistic as I can ever be.
So it’s a new year, Here’s what I think is going to happen:
Price growth slows
Rising interest rates, stress testing, and unaffordable housing in Canada’s largest cities will continue to dampen the national statistics — Toronto and Vancouver continue to pull us down where as Ottawa and Montreal build us up. A general global economic slow down, weakening oil and an American stock market in free fall are causing a bit of uncertainty which is being reflected in house prices.
However balancing those negatives are Canada’s record immigration levels and strong job market which will continue to keep prices from falling, except it seems in our two largest real estate markets.
Number of sales down
According to the Canadian Real Estate Association (CREA), home sale activity will remain much the same as in 2018. Again, the stress test and rising interest rates are the reasons for this.
In Kitchener-Waterloo, we still have a Seller’s Market. Historically low inventory. Rising prices. Last year the market was hot, then cool, then hot, then cool one more time again. The middle of the market, the main market — the average three bedroom home in a good neighbourhood is clearly in the Seller’s Market territory.
Homes near $1M are still a deal compared with homes in the $500k-$700k range and a super-duper deal compared with what you get in the GTA, of course.
The average number of days on market increased during the year, which indicates that the market is slowing down, reaching equilibrium.
Rents will rise
Rents follow real estate values. It just takes them longer to catch up. In 2019, they will continue to rise following the rapid rise in real estate values is 2015-2016.
I am surprised what some people are willing to pay for rent.
Most in demand
Freehold townhouses, and entry level homes with basement suites, will be much in demand this year. This is due to affordability and first-time home buyers doing whatever they can to get into the market.
Larger condo units
We need more larger units that can accommodate families. However I read more and more about micro apartments smaller than 300 square feet.
Real estate is local
Much of the above covers the national market. But what about Kitchener-Waterloo?
Last year we outpaced other urban centres, we broke with he trend and had moderate growth, a surprising strong November. KW, is one of only five markets that has not seen price erosion since the market peak of May 2017. With residential listing inventory still well below our local ten-year average and continued sales volume growth, the Kitchener-Waterloo real estate market has been somewhat of an exception nationally.
Influences and Influencers in 2019
- The LRT will finally start carrying passengers. This will lead to an ever increased interest in homes and neighbourhoods touching the line.
- Google workforce is expanding. The homes that are most attractive to Googlers will be most competitive. These will include the neighbourhoods around Google, the condo units and homes in neighbourhoods along the LRT line as well as modern homes in great neighbourhoods for those Googlers with families.
- Buyers out of the GTA will continue to impact our Kitchener-Waterloo real estate market. Affordability, a more relaxed lifestyle and less crime are the main reasons why many move here from the big city and the sprawling fringe cities. I was out recently with a lady thinking of moving here from the GTA. She said that she is considering Barrie too. I think we are looking more and more like Barrie.
A word to the wise
Something to keep in mind when you read the news, CREA is forecasting 0.5% fewer sales in 2019. This has been revised (down) a couple of times in recent months, but that is number of sales, not price movement. People often read the headlines incorrectly and think prices are predicted to fall. They aren’t, at least not here. Fewer new listings puts pressure on buyers, not sellers.
Mark Twain once said that history does not repeat itself, but it rhymes. I expect, I predict 2019 to be much the same as 2018. We know the tune, but maybe lost the sheet music.