Home prices in this Canadian city poised to grow by 10% in 2019
By Josh Sherman, January 14, 2019
Based on a leading indicator for where home prices are headed, an
economic-research firm is predicting a booming year for one of Canada’s
largest housing markets.
Capital Economics suggests Montreal home prices appear on pace to
surge by 10 percent this year on the heels of a 4.4-percent annual
increase recorded this past December, as recorded in the
Teranet-National Bank House Price Index.
This is based on a reading of the sales-to-new listings ratio.
Sales-to-new listings ratios between 40 and 60 percent typically
indicate a balanced market, with ratios below that range favouring
buyers and ratios above it benefitting sellers.
Chart: Quebec Federation of Real Estate Boards
The ratio, expressed as a percentage, is calculated by dividing the
number of sales in a given month by the number of listings that appeared
on the market during that same period. A ratio of 100 percent suggests
homes are being sold almost as fast as they are listed.
On a year-over-year basis, active listings in Greater Montreal sunk
by 18 percent this December, and the number of newly listed homes was
down by 4 percent compared to the same month in 2017.
Montreal is somewhat of an anomaly among mid- and large-sized housing markets across the country.
For example, looking at the sales-to-new listings ratio for
Vancouver, price declines of 5 percent can be expected in 2019, Capital
Economics says. Vancouver’s sales-to-new listings ratio peaked at around
90 percent in 2016 and has since plummeted to the mid-30-percent range.
Chart: Capital Economics
“New supply is likely to weigh further on prices in Vancouver. At
current absorption rates, the supply of unsold new units looks set to
rise to a record high,” Stephen Brown, a senior economist with Capital
Economics, writes in
a Canada Data Response.
Capital Economics has been known for bearish forecasts, often
contradicting the consensus among big-bank economists. But multiple
observers are anticipating Montreal’s market will continue to show
strength this year.
The Canada Mortgage and Housing Corporation says demand from growth
in employment and a prime homebuying demographic, those aged between 25
and 44, will support the market over the next two years.
Meantime, Douglas Porter, BMO’s chief economist, is forecasting a healthy 2019 for the Montreal market.
This summer, Paul Cardinal, an analyst with the Quebec Federation of
Real Estate Boards told Livabl, “The strength of the [Montreal] market
is built on incredibly strong fundamentals.”