After a disappointing 2018, when housing prices and sales declined, 2019 has been a year of resilience for housing markets across most of Canada. Not only did sales numbers stabilize and resume an upward climb, but prices also demonstrated some strength.

As we move closer to 2020, those involved with the real estate industry and the million-plus Canadian households who are likely to buy or sell a residential property in the next year are wondering whether things will continue to improve in the year ahead, or if there is more trouble in store.

The good news is that a review of the forecasts by leading real estate experts in Canada points to a recovery in 2020. The Canadian Real Estate Association (CREA) estimates the national home sales to reach 530,000 units in 2020, an 8.9 per cent increase over the total expected for 2019. CREA also expects the national average price to hit $531,000 in 2020, a 6.2 per cent increase.

Royal LePage, meanwhile, is predicting a 3.2 per cent year-over-year increase in housing prices next year with RE/MAX a little more optimistic at 3.7 per cent. Though their benchmark prices are different from CREA, they see the market moving in the same direction.

Likewise, a poll of 18 economists, conducted by Reuters in November, also saw gains ahead, predicting Canadian housing prices would rise by 3 per cent in 2020 and 2.9 per cent in 2021.

The positive forecast for housing markets in 2020 is supported by strong immigration numbers that are likely to maintain a sustained demand for housing in Canada’s most populous housing markets. A Royal LePage survey reported in October 2019 that “newcomers to Canada are expected to purchase one in every five homes on the market over the next five years.”

At the same time, CREA notes that the Bank of Canada is unlikely to raise interest rates in 2020, which will drive demand for mortgage finance.

While most market watchers are optimistic about housing, there are some causes for concern. For starters, not everyone expects a three-plus per cent jump in prices. Fitch Ratings, a debt assessment firm, is forecasting a mere 1 per cent growth in housing prices in 2020. When adjusted for 2 per cent inflation, Fitch is forecasting a decline in real house prices for the next year.

Another concern is that listings are not keeping pace with sales. An increase in new listings, when sales are climbing, is needed to restrict inflationary pressures. Royal LePage, in its forecast for 2020, is also mindful of a lack of growth in listings. “The story in 2020 will be lack of supply,” warns the real estate firm.

Accompanying the tightened supply is growth in mortgage credit. This has caught the attention of the Bank of Canada. In a recent address, Carolyn Wilkins, senior deputy governor of the Bank, noted that a drop in mortgage rates had “boosted” the markets. “Many of the same ingredients that were present in some housing markets three years ago — namely strong underlying demand, tight supply and low-interest rates — are present again,” she noted.

Despite the concerns, markets are better equipped to deal with the determinants of inflationary pressures. The Bank of Canada expects “the regulatory and other measures in place will support the quality of new credit and mitigate the buildup of imbalances in the housing market.”

The regulatory measure credited the most with addressing housing price inflation is the stress test, which was expanded in January 2018 to include uninsured mortgages and required borrowers to qualify at a higher rate than the negotiated rate with the lender to address the possibility of a future rate hike.

While Prime Minister Justin Trudeau has directed his finance minister, Bill Morneau, to review the tests and potentially make them more dynamic, it is not certain if or precisely how that will happen. Any changes will have to balance the needs of Alberta and the Prairies, where housing markets have been struggling, with those of regions where demand has already started to pick up.

All told, a vibrant labour market, vigorous demand for housing and low interest rates suggest conditions will be favourable for housing in 2020. The federal government’s initiative to help new homebuyers with shared equity mortgages and a possible review of the stress test are also positive signs. But as always in real estate, there are plenty of unknowns that could disrupt that positive picture.

Murtaza Haider is a professor of Real Estate Management at Ryerson University. Stephen Moranis is a real estate industry veteran. They can be reached at www.hmbulletin.com.