If Calgary and Toronto met in a housing battle, who do you think would end up as the winner: Toronto, with a strong market including extreme condo demand, or Calgary, a growing energy-based city? It seems to be a balanced battle.
The Housing Market Today
Toronto Real Estate Board (TREB) recorded about 7,032 sales in February 2012, while Calgary recorded 1,736 sales. The big difference isn’t surprising, as Toronto is much bigger. Sales increased in both cities, but in Toronto, the year-to-year change was higher, at 10.8 per cent versus Calgary’s 6.96 per cent. The difference between average house prices is $77 354 — $425,154 in Calgary and $502,508 in Toronto. The condo market was extremely strong in Toronto, while Calgary’s total condo sales declined by 11.74 per cent.
“Price growth will continue to be very strong until the market becomes better supplied,” said Toronto Real Estate Board President Richard Silver. “It is important to note that both buyers and sellers are aware of current market conditions. This is evidenced by the fact that homes sold, on average, for 99 per cent of the asking price in February.”
Calgary, which is supported mainly by immigration and the energy sector, is likely to go on growing and developing its housing market, but it will probably not keep the title of “hot growth mecca” as it was named in Emerging Trends in Real Estate last year.
“Conditions had favoured the buyer in the last couple of years but we are seeing signs that the market is transitioning closer towards more balanced levels. Growth in employment and migration, supported by activity in the energy sector will help sustain demand for new and resale homes,” noted Richard Cho, senior market analyst in Calgary for Canada Mortgage and Housing Corp.
Result: Point for Toronto
Toronto’s housing affordability is typically higher than in Vancouver but significantly below Calgary’s level. According to the latest report for the last quarter of 2011 by RBC, if the average Torontonian household wanted to buy a standard two-storey house, home ownership costs, including mortgage payments, utilities, and property taxes take up 61 per cent of a her pre-tax income, while average Calgarians spend only about 37 per cent of their income.
“Conditions in the Toronto-area market are slightly more favourable to sellers presently. This will make further affordability improvement difficult in the near term,” says the report. It is more optimistic about Calgary’s market, claiming that strong market fundamentals will help the city‘s housing market turn a corner over the next periods. “With home affordability at the best levels Calgary has seen in the last six years and a significant increase in net new jobs at the end of 2011, we expect these strong fundamentals will help spur the Calgary housing market in the year ahead,” adds Robert Hogue, senior economist with RBC.
Result: Point for Calgary
Housing Market Tomorrow
According to Calgary Real Estate Board (CREB)’s forecast, demand for new homes in Calgary will rise: housing starts are expected to rise by 11 per cent. Total sales should grow by 12 per cent.
CREB President Bob Jablonski concluded: “2012 will provide consumers with stable price growth in a low interest rate environment, encouraging both the first-time buyers and the move-up buyers to be more active in the marketplace.”
Housing Market Outlook 2012 by Remax wrote about positive prospects for Toronto as well. Tight inventory levels and unrelenting demand will probably continue to buoy housing values. Both home sales and house prices are expected to rise to 93,000 units and $488,000, respectively. Low interest rates, a tight rental market, and declining vacancy rates will stimulate homebuying. However, Jason Mercer, TREB’s Senior Manager of Market Analysis, noted: “If tight market conditions continue to result in higher than expected price growth as we move into the spring, expectations for 2012 as a whole will have to be revised upwards.”
Result: Point for both cities