As peak millennials find themselves in their 30s, it’s possible that there will be even more stress on the single-family housing market in 2020, according to a recent report by Royal LePage.
The Royal LePage Market Survey Forecast predicts that older millennials will be looking for more space and yards in the new year as they aim to grow their families. Those who have afforded a condo in places like the Greater Toronto Area will likely have some equity built up that they can use towards a home purchase in the suburbs.
The problem with this is that the GTA is already struggling with low supply in the detached home market, and increased demand will create more competition, potentially causing prices to spike. Royal LePage predicts the median price of a two-storey detached home in the GTA will increase 4.5% in 2020 to $1,027,200. The median price of a condo is expected to climb 6% to $600,000. Royal LePage believes the First-Time Home Buyer Incentive will likely assist some buyers in the condo market, but not when it comes to buying a single-family home.
"Inventory is critically low and it is possible that we could see a return to accelerating high price appreciation in the near term without new supply becoming available," said Kevin Somers, Chief Operating Officer, Royal LePage Real Estate Services Limited, in a release. "Areas such as Richmond Hill and Markham, which were among the hardest hit by the recent market correction, have already shown signs of a recovery while areas closer to the city centre are showing significant momentum heading into 2020."
The average home price in the GTA is forecasted to increase 4.75% to $883,700 next year. A recent RE/MAX forecast predicted a bigger average price jump of 6% in the GTA. On a national level, the average home price is expected to go up 3.2% to $669,800. This prediction is similar to RE/MAX’s forecast of a 3.7% increase.
The median price of a condo in Canada will climb 3.6% to $506,100 and the median price of a two-storey detached home will jump 3.1% to $785,400.
"Our 2020 national forecast is based on a continuation of healthy economic conditions," said Phil Soper, president and CEO, Royal LePage. "Paradoxically, a slowdown in economic growth could cause us to revise the outlook upward. While one month does not a trend make, November's surprisingly weak employment numbers may be the trigger that causes the Bank of Canada to join the U.S. Federal Reserve in lowering interest rates.”
"Falling rates normally encourage new housing demand," added Soper. "This would mean further upward price pressure in regions where employment remains healthy, which is most of the country. That window to lower or flat home prices is closing or has closed for most Canadians."
Prices overall are expected to climb because of increased demand. Those who stepped onto the sidelines back in 2018 because of the stress test have now adjusted expectations and seen how the stress test has had little effect on property values. These buyers are starting to get back in the game.
There’s also the immigration factor to consider. A study by Royal LePage from earlier this year found that newcomers to Canada will account for 20% of the home sales activity over the next five years. That’s nearly 700,000 residential transactions! Almost 90% of newcomers to Canada are confident in the housing market and 75% arrive with savings to buy a home.
2019 was a year of rebounding, and it looks like 2020 will be a strong year of activity, increased demand, and gradually rising prices.