Housing Market Has Peaked, National Average Price Higher Because of Vancouver Market, Royal LePage
This article appeared on CBC.ca on July 7, 2011.
Canada’s housing market has hit a peak and will likely slow in the next six months, says one of the country’s largest real estate companies, Royal LePage. “The market has seen its near-term peak in house price appreciation,” the company said in a forecast released Thursday. “A slower second half of the year is expected.”
The realtor group says home prices by the end of 2011 will be 7.7 per cent higher than they were at the end of 2010, on average. Sales volume is forecast to fall by two per cent over the same period.
High house prices are concealing early signs of a moderating market, the report said. The national average price of a detached bungalow has gained 7.5 per cent in the last 12 months to $356,625. ‘This trend cannot continue indefinitely’—Royal LePage CEO Phil Soper
Meanwhile, the price of a standard two-storey home rose 6.1 per cent to $390,163 and the price of a standard condominium rose 3.5 per cent to $238,064.
“In many of Canada’s regional markets, we saw house prices appreciate at a significantly faster rate than wages and salaries, and this trend cannot continue indefinitely,” Royal LePage CEO Phil Soper said.
Red hot Vancouver market bucks trend
There are wide regional variances within those numbers. The Canadian Real Estate Association has noted repeatedly in recent months that the national average price is being skewed higher by a red-hot Vancouver market, for example.
The Vancouver market continues its rally, Royal LePage says, with the average price of detached bungalows and standard two-storey homes both over $1 million and seeing double digit year-over-year gains.
It is interesting to note, however, that the average price for a standard Vancouver condominium saw a very modest increase of 2.5 per cent over the past year.
Soper noted that Vancouver — specifically certain neighbourhoods in the lower mainland of British Columbia — “remains an anomaly, as investment from outside of the country continues to support higher price levels.”
Other regions see gains
Most regions are still seeing strong gains, but home prices in Calgary declined modestly as the market continues to adjust following the Alberta housing boom experienced in the middle of the previous decade, the report noted.
The Atlantic provinces are still seeing gains, although smaller than the ones seen in recent quarters. And additional inventory coming on to the market in the Montreal area has provided home buyers with more choice and opportunities for negotiation, the report said.
Toronto’s seller’s market witnessed strong year-over-year price appreciation, with price gains ranging from 4.7 per cent to 6.1 for the housing types surveyed.
The company is predicted flat price gains in the fourth quarter of 2011 as the year-ago period was unusually strong.
The report makes no mention of the current mortgage rate environment. but it’s clear that borrowing costs are set to rise — something that could put pressure on home prices. Earlier this week, a couple of major banks raised their posted five-year fixed mortgage rates by .15 percentage points to 5.54 per cent.
The Bank of Canada is expected to resume raising its key overnight lending rate later this year. That will cause the interest rate for variable mortgages to rise.
With files from the Canadian Press