Instead of a tale of two cities, it could be a tale of two sides of the country. That’s referring to the increasing disparity in real estate markets that’s being projected for Western Canadian cities, like Calgary and Edmonton, and Eastern cities such as Toronto, Vancouver and Montreal.
The oil and gas market benefited from a minor resurgence the first week of February. But, oil price is still down approximately 50% from this time last year. As has been commented on numerously in the media, the unexpected and rapid decline in energy market prices has put a kink on plenty of sectors fundamental to the Canadian economy.
With stronger ties to oil and gas, western Canadian cities like Edmonton and Calgary have already started seeing the effects of lower oil prices, one sector being the cities’ real estate markets. A recent Toronto Stararticle noted that in January home sales in Edmonton dropped 26 per cent and in Calgary sales fell 39 per cent. This is especially notable considering that Calgary and Edmonton were ranked as particularly strong real estate markets just last year.
Indeed, even if oil prices returned to their previous highs, the damage to Edmonton and Calgary’s real estate markets may have already been done, meaning that it would take a greater part of a year and most likely into 2016 for the cities’ markets to recover.
Toronto’s real estate economy, however, is a different story. Based on sales figures recently provided by the Toronto Real Estate Board (TREB), the first month of 2015 saw a very confident start in the city’s real estate market, with home sales rising 6.1 per cent compared to January last year.
The factors that play into supply and demand in real estate is always a complicated bag, but this year may be particularly involved. There is no doubt that the GTA is seeing the economic effects of lower oil prices. But, other factors are having a more beneficial influence on the city’s real estate.
AccessEasyFunds’ Larry Weltman agrees with the opinion that the Toronto real estate market will remain strong throughout 2015 and possibly into 2016, despite more concerning national economic trends.
“There are economic points specific to Ontario that are beneficial to Toronto and to the province as a whole – and those should be kept in mind,” says Larry Weltman. “For one thing, in addition to rate cuts, the province will be benefiting from a lower loonie, more so than western cities.”
Larry Weltman, “Sales outside of Toronto proper have been particularly high and I see that continuing for the rest of the year.”
In January, the Bank of Canada cut interest rates. Whether banks will pass the opportunity of lower interest rates on to consumers is one thing. Either way, so far the Bank’s decision to cut rates has done what it’s intended to do – stimulate additional confidence with buyers in the Toronto market.
Unfortunately for buyers in the GTA, the supply of homes remains as competitive as ever. The number of active listings in the Toronto area, which includes new and previously unsold listings, was down 2.5 per cent in January. This means that prices for Toronto property will continue to see a competitive uptick.
Although many homebuyers in Toronto may have been hoping for the city’s real estate market to cool in 2015, the numbers are saying something entirely different.
Disclaimer: The views expressed here are solely those of the author. The author rakes no responsibility for any damages of any kind incurred or sufferred as a result of the use or reliance on his views expressed in this article. Readers should obtain advise from a licensed realtor and other professionals when making decisions relating to purchasing or selling real estate.