National price appreciation forecast to soften modestly for the remainder of the year
TORONTO, July 10, 2012 /CNW/ - The Royal LePage House Price Survey and Market Survey Forecast released today showed the average price of a home in Canada increased year-over-year between 3.3 and 5.5 per cent in the second quarter of 2012. By the end of 2012, Royal LePage expects national average prices to be 3.2 per cent higher compared to the same period of 2011, in line with the company's original year-beginning forecast of 2.8 per cent.
In the second quarter, standard two-storey homes rose 4.7 per cent year-over-year to $408,423, while detached bungalows increased 5.5 per cent to $376,311. Average prices for standard condominiums increased 3.3 per cent to $245,825. During this period, signs from across the country clearly indicated that the national housing market was at a turning point, with some major regions continuing to grow unabated while others peaked and began to pull back for the first time in three years.
"We have had three years of solid house price appreciation in almost all regions of the country," said Phil Soper, president and CEO of Royal LePage Real Estate Services. "Confidence in Canada's real estate market is sound, but home prices cannot grow faster than salaries and the underlying economy indefinitely. Some regions have reached or perhaps even exceeded the current upper level of price resistance as buyers have embraced an era of historically low mortgage rates."
Soper noted that when national average home values do soften, they historically have declined for only a brief period of time. Following a period of significant price appreciation, Canadian real property prices tend to flatten versus decline, until the economy catches-up to the new price norms. The last notable national price decline took place in 2008 and lasted only eleven months, previous to that there was a period of over sixteen years without a significant decline. The longest period of national average price decline since 1980 took place in 1995 and lasted for fourteen months. (See chart 1.1)
While average Canadian house prices continued to appreciate in the second quarter, some regional markets showed clear signs of softening demand. Strong price appreciation was experienced in Toronto as well as energy and commodity driven regions including St. John's, Winnipeg, Saskatoon, and Halifax. Regina, which made exceptionally strong gains in the previous year, also witnessed further strong year-over-year price gains in the standard two-storey and standard condominium markets. Soper noted that Toronto and Winnipeg will likely continue to see prices appreciate in the near-term as peak demand has yet to occur. Toronto's low inventory, particularly listings for detached homes, has continued to fuel its housing market.
The first-time buyer segment of the population, which represents up to half or all transactions and where activity strongly correlates to low interest rates, is expected to be slowed by recent regulatory changes that will reduce access to insured mortgages.
"The most recent set of mortgage changes, the fourth in four years, is also the most aggressive. The cumulative impact of these new regulations has created a significantly higher hurdle for young buyers seeking their first home and comes at a time when the market was slowing of its own accord. The timing of this intervention was unfortunate," Soper noted.
The dampening effect of the government's new regulations will be more likely to be felt in Vancouver where high home prices are already a significant barrier, as well as regions where buyers are finding it more difficult to get into the market due to tepid economic growth.
"The cycle of eroding affordability followed by softening home prices has begun in some regions and will be felt in many parts of the country by year-end. The paradox of the real estate industry is that while these natural cycles will leave some Canadian home owners feeling nervous about the value of their homes, they bring hope and relief to others who have struggled to find an affordable entry point at which to acquire their first home or to move up to their dream neighbourhood," added Soper.
Regional Market Summaries
Demand created by young professionals and investors has put upward pressure on Halifax's housing market. Average price increases were seen across all three housing types surveyed. Detached bungalows witnessed the largest gains, increasing 7.3 per cent to $285,833. At the end of 2012, average house prices in Halifax are forecast to increase 5.2 per cent over 2011. Detached bungalows in St. John's witnessed the largest average price gains across Canada, rising 12.3 per cent.
Montreal's house prices increased modestly in the second quarter of 2012. Standard condominiums witnessed the largest average price increase, rising 3.9 per cent to $236,528. At the end of 2012, average house prices in Montreal are forecast to be 1.3 per cent higher than 2011.
Low interest rates and a healthy local economy driven by government employment resulted in healthy year-over-year price appreciation in Ottawa with gains ranging from 4.9 to 5.8 per cent. At the end of 2012, average house prices in Ottawa are forecast to be 3.5 per cent higher than 2011.
Low inventory levels continued to put upward pressure on house prices in Toronto. Average price gains ranged from 5.5 to 8.3 per cent for housing types surveyed. At the end of 2012, average house prices in Toronto are forecast to increase 8.0 per cent over 2011.
Winnipeg's real estate market produced average price gains ranging from 4.7 to 9.2 per cent as low interest rates continued to fuel the market with demand from first-time buyers. Standard condominiums posted the largest increase with the average price rising to $190,857. At the end of 2012, average house prices in Winnipeg are forecast to be 5.4 per cent higher than 2011.
Migration and first-time buyer demand, coupled with low interest rates drove average year-over-year price gains in Regina. Average price appreciation varied from standard condominiums, a popular choice among first-time buyers, posting a 10.2 per cent increase to detached bungalows posting a 2.4 per cent increase. At the end of 2012, average house prices in Regina are forecast to be 8.1 per cent higher than 2011 - the largest price increase forecast across the country.
Despite market activity increasing by approximately 30 per cent, Calgary remains in a balanced market. Detached bungalows were the exception, rising 5 per cent. Standard condominiums posted a modest decrease of 0.8 per cent. Edmonton posted similar average price changes with detached bungalows increasing 5.1 per cent, while standard condominiums decreased 1.1 per cent. At the end of 2012, average house prices in Calgary are forecast to increase 6.5 per cent, while Edmonton house prices are expected to increase by 1.7 per cent compared to 2011.
Vancouver's year-over-year average price gains remained positive despite an increase of inventory on the market. Detached bungalows posted the highest average price increase, 6.0 per cent, rising to 1,087,125. At the end of 2012, average house prices in Vancouver are forecast to decrease 6.5 per cent compared to 2011.
Royal LePage's quarterly House Price Survey shows the annual change of prices for key housing segments in select national markets.
|Detached Bungalows||Standard Two Storey||Standard Condominium|
|Market||Q2 2012 Average||Last Quarter Avg||Q2 2011 Average||Bungalow % Change||Q2 2012 Average||Last Quarter Avg||Q2 2011 Average|| 2 Storey
|Q2 2012 Average|| Last
|Q2 2011 Average|| Condo
About the Royal LePage House Price Survey
The Royal LePage House Price Survey is the largest, most comprehensive study of its kind in Canada, with information on seven types of housing in over 250 neighbourhoods from coast to coast. This release references an abbreviated version of the survey which highlights house price trends for the three most common types of housing in Canada in 90 communities across the country. A complete database of past and present surveys is available on the Royal LePage Web site at www.royallepage.ca. Current figures will be updated following the complete tabulation of the data for the second quarter 2012. A printable version of the second quarter 2012 survey will be available online on August 9, 2012.
Housing values in the Royal LePage House Price Survey are Royal LePage opinions of fair market value in each location, based on local data and market knowledge provided by Royal LePage residential real estate experts.
About Royal LePage
Serving Canadians since 1913, Royal LePage is the country's leading provider of services to real estate brokerages, with a network of 14,000 real estate professionals in over 600 locations nationwide. Royal LePage is the only Canadian real estate company to have its own charitable foundation, the Royal LePage Shelter Foundation, dedicated to supporting women's & children's shelters and educational programs aimed at ending domestic violence. Royal LePage is a Brookfield Real Estate Services Inc. company, a TSX-listed corporation trading under the symbolTSX:BRE.
For more information, visit www.royallepage.ca.
Image with caption: "Canadian Average Monthly Home Prices 1980 to 2012 (Chart 1.1) (CNW Group/Royal LePage Real Estate Services)". Image available at: http://photos.newswire.ca/images/download/20120710_C7216_PHOTO_EN_16144.jpg
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