Canada’s housing market rebounded in 2013 from the effects of stricter mortgage rules the previous year. In most regions, sales rose moderately above past-decade norms, supported by low interest rates and falling unemployment. Home builders kept pace with demand, encouraged by new household formation and steady price gains.
Home prices are climbing in line with family income, a more sustainable trend following a decade of rapid increases. Affordability remains healthy across the country, with the exception of the detached markets in Vancouver and Toronto. The condominium market is still an affordable and much-needed alternative to pricey detached homes for the thousands of international migrants and young people moving to these two cities. Oil-rich Alberta is enjoying strong gains in housing activity and prices, supported by an influx of people from other provinces seeking work. Saskatchewan’s housing market also remains strong due to low unemployment and in-migration.
Housing activity is expected to stabilize in 2014, supported by low borrowing costs and steady job growth. The Bank of Canada will likely keep interest rates unchanged for a third consecutive year as a result of low inflation and a strong currency. Economic growth is expected to pick up moderately in response to strengthening U.S. demand, supporting employment growth. But the housing market also faces a number of headwinds, including elevated household debt and, in Vancouver and Toronto, poor affordability. House prices should continue to climb modestly in most regions, as markets are largely balanced. Alberta and Saskatchewan, two of the fastest growing provinces, should continue to see strong price increases, while Vancouver and Toronto are vulnerable to a modest pullback.