Recent mortgage rule changes slow market activity
VANCOUVER, Oct. 3, 2012 /CNW/ - The Royal LePage House Price Survey released today showed modest year-over-year price decreases for all three housing types surveyed as inventory started to climb.
Detached bungalows posted a decrease of 0.9 per cent to $1,013,500, while standard two-storey homes decreased 1.5 per cent year-over-year to $1,125,750. Standard condominiums posted the largest decrease, slipping 3.0 per cent year-over-year to $498,000.
"We've seen a modest increase in inventory as market activity has slowed more than the seasonal norm," said Bill Binnie, broker and owner of Royal LePage North Shore. "As predicted, recent changes to mortgage lending rules have had an effect on the Vancouver housing market as affordability was an issue prior to the rule change."
Chris Simmons, broker and owner of Royal LePage Westside & City Centre, commented that although Chinese buyers have not been as active in the housing market as in previous years, they are expected to return once prices stabilize.
"Vancouver is a wonderful place to live and both national and international desire to live here has not diminished," said Simmons. "Buyers are being very cautious. However, the variety and choices of housing that is available as well as price reductions will spur activity sooner rather than later."
Nationally, the average standard two-storey home in Canada increased 4 per cent year-over-year rising to $403,747, while detached bungalows rose 4.8 per cent to $366,773. Standard condominiums witnessed an increase of 1.8 per cent to $243,607. Most cities in Canada experienced modest price appreciation in the quarter, but fewer homes were sold compared to the same period in 2011.
"A drop in the number of homes trading hands typically precedes a period of softening house prices. Where there is reduced demand, those who want to sell their homes adjust their asking price to stimulate interest. Home sales were positive in July, fell 9 per cent year-over-year in August and we are expecting September to show a decline as well," said Phil Soper, president and chief executive, Royal LePage. "We had predicted this cyclical change early in the year, a natural market reaction after a period of strong expansion. Changes to mortgage regulations, which took effect on July 9th, accelerated the correction."
In July, the Minister of Finance announced that the maximum amortization period for insured mortgages would be reduced to 25 years from 30 years. This was the fourth intervention in just four years and the most impactful. Potential first-time buyers, which in a typical market represent one third to one half of all purchase transactions, felt the changes immediately.
"While hard-hit in the short-term, we expect first-time buyers to adjust to the tougher mortgage qualifications. The dream of homeownership is very much alive among young Canadians. They may remain renters for some time as they save; some will opt for less expensive neighbourhoods and some will purchase smaller homes," added Soper. "In the meanwhile, we will feel their absence in national sales statistics."
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 third quarter 2012. A printable version of the third quarter 2012 survey will be available online on November 2, 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.
SOURCE: Royal LePage Real Estate Services
For further information:
Director, Global Communications & Public Relations
Royal LePage Real Estate Services