Vancouver is expected to lead all Canadian cities with 3.3% in GDP growth in 2017 propelled by strong employment gains and rousing housing starts. Most of these starts will be multifamily units as developers focus on building mixed-use developments and high-density condos. It remains to be seen how the British Columbia government’s additional property transfer tax for foreign buyers will affect the Vancouver market over the long term. While intended to curtail foreign property investment, skeptics suggest the tax will do little to dissuade foreign buyers who can already afford the market’s sky-high prices. Millennials are driving up Vancouver’s rental market, searching for new, higher-quality units near amenities and close to transit. Rental units are in incredibly short supply, with vacancy rates consistently around or below 1% for the past five years. Another emerging challenge is the lack of amenities from stores to schools in the downtown core.
Toronto’s economy remains healthy and growing, with construction, transportation, warehousing, retail, wholesale, and manufacturing all contributing to this growth. According to the Conference Board of Canada, Toronto’s construction sector growth achieved a 14-year high thanks to a 46% rise in housing starts—most of those multifamily units—with GDP forecast to remain steady at 2.6% in 2016 and 2017.
The residential market generally remains strong, with solid sales volumes and rising prices, buoyed by a strong local economy, steady immigration, and low interest rates. The lack of supply and available land is seen as a key factor contributing to the market’s rapidly rising house prices. Due to the high cost of moving, more homeowners are choosing to stay put and invest in renovations. Many respondents believe that government land use policies are a factor holding back supply.
Toronto’s condominium inventory has hit a ten-year low and demand remains strong, so respondents expect to see more high-rise multiresidential projects enter the pipeline in the years ahead.
Retail is viewed as the most troubling segment of the market. Online commerce is putting enormous pressure on retailers and retail property owners alike.
Montréal’s economy is poised to achieve its best growth in five years, with manufacturing, financial services, and business services all having a healthy outlook. The region’s GDP is projected to stay at a stable 2% in 2016 and 2.1% in 2017, according to the Conference Board of Canada. Despite high vacancy rates for office space—11% down-town and 17% in the suburbs as per the Conference Board of Canada—demand for Leadership in Energy and Environmental Design (LEED) certification and upgraded technology remains high.
Montréal continues to absorb the city’s condo stock, and “pure” condominium plays have given way to mixed-use developments. More of these are on the horizon, especially around transit hubs, and the trend is increasing cooperation between investors and developers.
Ottawa’s economy is expected to grow modestly in 2016 and beyond as the city recovers from government spending restraints that have resulted in the loss of thousands of public service jobs. GDP is projected to grow 1.6% in 2016 and 2.1% in 2017, according to the Conference Board of Canada. Respondents said they’re focused on smart development and plan to intensify where communities already exist. As Ottawa’s major transit rebuilding effort progresses over the next ten to 15 years, respondents anticipate that the city’s real estate market will regain momentum, driven by the rise of high-density mixed-use developments focused around key transit hubs.
The residential market is seeing little movement. Demand for new homes is down sharply since there aren’t enough families interested in buying single-family homes. Ottawa housing starts have fallen for three straight years, and some developers are currently shelving their development plans for up to five years.
Québec City should see improved economic growth this year on the strength of an improving manufacturing sector and the continued strength of its finance, insurance, and real estate sectors. The city’s GDP is projected to grow 1.9% in 2016 and 2.1% in 2017, according to the Conference Board of Canada.
Demographic trends are changing the Québec City market, as boomers liquidate assets and move into rental units to preserve their capital outside of real estate. Millennials also are keen to rent in order to preserve a degree of personal mobility and flexibility, opting for units close to transit and service-oriented neighbourhoods.
Edmonton’s GDP is expected to contract slightly in 2016, as low oil prices contribute to slower activity in a number of sectors. The local real estate market has softened as a result, but the city still remains stronger than other Alberta markets; infrastructure spending and the redevelopment of the downtown core have helped mitigate the impact.
It remains to be seen exactly how the real estate markets will be affected by the Fort McMurray wildfires outside Edmonton earlier in 2016. So far, the impact has been unexpectedly moderate, and residential prices have remained relatively stable rather than dropping or rising sharply.
The sharp drop in oil prices pushed Calgary’s economy into recession last year, and further contraction is expected this year. GDP growth in 2017 is forecast at 2.1%, with less than 1% employment growth.
Despite this, owners are not in any hurry to sell. Calgary’s real estate market has seen booms and busts before, so respondents believe that developers and investors aren’t in a hurry to sell existing assets or exit the market. As national banks pull back on their investment in the region, regional banks familiar with Alberta’s market understand the opportunities and are getting more involved.
Calgarians continue to resist condominium living, as comparatively affordable house prices attract prospective buyers to suburban residential homes. But signs exist that this attitude may be changing. Millennials in particular are prioritizing value, quality, and maintenance-free living over square footage and yard sizes—a shift that is driving interest in smaller residential properties and upscale townhouses.