It’s that day of the year when I dig down into my real estate toolkit to drag out the crystal ball to consider what we might expect for the real estate market in Southern Georgian Bay including the key areas of Clearview, Collingwood, Grey Highlands, Blue Mountains, Meaford and Wasaga Beach. I’ll admit it’s a scary task, but I’ve been lucky each year such as in last year’s predictions.
The story of 2019 is sure to be one of navigating uncertainty, some volatility and cautious optimism.
Challenges to Consider
- Interest rates: There were five hikes in rates since mid-2017 to the current key lending rate of 1.75%. The Bank of Canada is aiming for a rate of 2.5% however, they held the line in December and it is expected that we may not reach that goal level until later in 2020. We are likely to see some hikes in 2019 if the economy remains robust.
- Personal debt levels remain high – too high and interest rates will put a strain on the ability of Canadians to maintain spending levels
- Regulatory changes: The mortgage stress test rules introduced in early 2018 had the desired effect of cooling the market. Any impact from that change has likely been absorbed into the current market. Among other impacts, it has shut some buyers out the market resulting in escalating rental rates.
- Oil Prices are a cornerstone of the Canadian economy and are sitting at their lowest levels in a decade. Alberta and OPEC production cuts may stabilize or increase prices in 2019
- Global Economics are always a question mark. There is growing talk of a global economic slowdown and of course, there are the endless ups and downs connected to the negotiations between the two largest economies: The U.S. and China.
- The Stock Market has had its worst performance in a decade. This is a double-edged sword as it sends some investors into the real estate market or in other cases, losses keep them out of the market.
- Demographics are the heaviest driver of the economy and real estate market. We’re at an interesting point of time where millennials are beginning their home buying years while baby boomers are still active in the market buying and selling; often for retirement lifestyle changes.
- Population growth: Canada has one of the fastest growth rates of any G8 nation and is growing faster than many other industrialized countries. Our population has a net gain of one person every two minutes or, 905 people a day. The most densely populated area of the country is in southern Ontario
- Immigration: The Governments multi-year immigration levels plan commits to welcoming more permanent residents to Canada over the next few years reaching its highest levels in recent history. The plan includes raising immigration levels to between 300,000 and 350,000 in 2019 and between 310,000 and 360,000 in 2020.
- The Economy: Despite a moderate deceleration of GDP growth expected in Ontario in 2019, unemployment remains low, growth is occurring, and the economy remains stable.
- Election: With a Federal election ahead in October 2019, we can expect that there will not be any restrictive policy announcements but rather, things like tax relief and other incentives to keep people happy before they head to the polls.
- Rental Rates: While people needing to rent won’t consider this positive in any way, homeowners and investors can expect to see rental rates climb in 2019 as more and more buyers are shut out of the house buying market.
- Our area benefits from demographic changes.
- Baby boomers are retiring and so many are anxious to get out of the city. The Southern Georgian Bay region has become one of the most desirable areas in the Province for this demographic.
- Young professionals are conscious of lifestyle and health. They too are anxious to live in communities like ours and, we are seeing an influx of entrepreneurs who are capitalizing on the growth in our area
- Secondary homes continue to be on the wish list for many people and things such as waterfront properties and slope side condominiums continue to be in high demand.
If we throw all the above data into a mixing pot, what do we get?
My crystal ball says we will continue to see a softening in the number of sales as we come off the high we experienced in 2016 and 2017 with a return to levels more comparable in unit sales to 2010/2011 and about 1700 sales for the year. I expect that prices will stagnate but still see moderate increases in line with or below inflation levels and likely in the range of 2% in our area. It’s a good thing as sky-high growth we’ve seen was not sustainable and rather than a housing crash, we’ve seen a moderate decline to healthier levels. I would expect that condo sales will represent 44-45% of our residential sales in this area and, we may see a decline in the number of sales in the luxury home market. By the end of the first quarter or certainly by mid-year, we should see a more balanced ratio of supply and demand as inventory levels increase.
For home buyers, the time to get into the market is now before further rate hikes occur next year. The rate you pay on a mortgage combined with moderate growth in prices suggests buyers will have to dole out more from their pockets by the end of 2019.
For sellers, the key is to price aggressively and present their homes for sale in the best possible light. A softening market means no more pie-in-the-sky pricing. Home repairs, decluttering and home staging are almost essential now in order to compete with a rising supply of competing homes for sale.
So that’s how I see it. What about you?