Royal LePage forecasts steady price gains for the full year, inventory shortages in large cities continue
TORONTO, July 9, 2014 – With the harsh winter now a fading memory, the average price of a home in Canada increased between 3.9 and 5.2 per cent in the second quarter of 2014. Prices are expected to increase steadily for the balance of the year, according to the Royal LePage House Price Survey and Market Survey Forecast released today.
According to the survey, price increases were posted across housing types, with detached bungalows seeing the highest year-over-year gains, rising 5.2 per cent to an average price of $406,454. Meanwhile, standard two-storey homes rose 5.1 per cent year-over-year to $440,972, while standard condominiums posted gains of 3.9 per cent to $258,501.
A closer look at Canada’s residential real estate market points to a tale of two city types, in which big city housing activity represents a small part of the picture but accounts for a large part of the gains in national average home prices. The shortage of detached single-family houses once again led to significant price growth in Toronto. In Calgary, new listings could not keep up with strong demand from a briskly expanding workforce, driving near double-digit price growth. Vancouver, which just last year was seeing year-over-year price declines, is now posting mid-single digit appreciation in the detached home categories, pushing regional price averages up to record heights. While the Montreal market recorded lower price gains than its large metropolitan counterparts, real estate demand experienced a renewed thrust following the provincial election in April with signs of a brighter market ahead for the sector.
In contrast, smaller city markets are seeing far more moderate house price gains. In Ontario, regions outside Toronto such as London posted year-over-year price increases of 2.2 and 2.0 per cent for detached bungalows and standard two-storey homes, respectively, while Ottawa remained relatively flat at 1.3 and 0.8 per cent in the same categories. In Edmonton, the price of a detached bungalow remained essentially flat, dropping 0.2 per cent year-over-year, while standard two-storey homes rose 3.8 per cent, compared to Calgary’s 9.7 and 7.9 per cent increases in the same categories. In British Columbia’s Okanagan region, Kelowna saw a 2.8 per cent rise in the price of detached bungalows compared to Vancouver’s 5.2 per cent rise in the same category.
“Chronic supply shortages are driving price spikes in Canada’s major cities, masking otherwise moderate home price appreciation nationally,” said Phil Soper, president and chief executive of Royal LePage. “While a widening affordability gap in Canada’s largest urban centres is characterizing the national market Canadians read about daily, year-over-year house price increases in most regions of the country are presently tracking below the historical average.”
Looking ahead at the remainder of 2014, Royal LePage is projecting that the national average house price will increase at 5.1% per cent for the full-year.
“Compared to other major forecasts, our year-beginning national outlook predicted a higher level of 2014 average price appreciation, yet supply constraints in a handful of our largest cities necessitate a revision upwards,” noted Soper. “Looking ahead to 2015, we expect house prices to track more closely to the rate of general economic growth. That is, we see price increases in Canada’s largest cities moderating, just as our smaller city markets should see a lift.”
Canada’s low interest rate environment coupled with a stable job market continues to support the country’s residential real estate sector across all housing types. Core inflation remains within policy guidelines, creeping up three-tenths of a point to 1.7 per cent in June. The U.S. economy, Canada’s primary export market, continues to gather strength, posting impressive job growth numbers in recent months. The condominium segment, which has been the target of scrutiny in recent months in cities such as Toronto and Vancouver has shown continued resilience, supported by shifting consumer preferences and enduring demand.
With economic strength comes a call from some quarters for further federal government policy intervention to cool the market. “Casual market observers have renewed calls for policy intervention to cool Canada’s real estate industry. We have supported most of the recent federal regulatory changes aimed at managing housing demand,” stated Soper. “At this time, we feel a move to further restrict access to home ownership is not warranted. Such policy would inevitably operate as a blunt instrument, causing unintended hardship to young Canadian homebuyers and the millions living outside a handful of our biggest cities.”
Regional Market Summaries
In Halifax, the average price of a detached bungalow increased by 1.2 per cent year-over-year, to $292,167, while the average price of a standard condominium also saw a slight lift of 0.7 per cent, to $217,500. Standard two-storey homes meanwhile saw a slight price decrease of 1.8 per cent to $327,300. Average Halifax house prices are forecast to increase 1.9 per cent by the end of 2014.
Robust economic conditions led to strong price appreciation in the St. John’s housing market, particularly in the higher-end segments. Both detached bungalow and standard two-storey home prices saw healthy gains year-over-year, rising by 3.3 per cent to $299,667 and 3.9 per cent to $408,000 respectively. Meanwhile, standard condominium prices experienced a moderate drop of 1.1 per cent, to $306,000, attributed to a change in condo fee structures.
In Montreal, the average price of a detached bungalow rose 2.6 per cent to $296,250, while standard two-storey homes increased 1.7 per cent year-over-year to $404,357. During the same period, average condominium prices remained unchanged. By year-end, Royal LePage forecasts average house prices to rise 1.7 per cent in the Montreal region.
House prices in Ottawa remained relatively flat in the second quarter. Detached bungalows increased 1.3 per cent year-over-year to $401,667, while standard two-storey homes remained relatively flat, rising by 0.8 per cent to $402,250. Standard condominiums saw a slight decline in price, dropping 0.7 per cent year-over-year to $257,500. Despite the slow spring, Royal LePage predicts a 2.5 per cent increase in Ottawa prices for the balance of the year as more buyers make their way into the market.
A continued shortage in inventory led to notable increases in Toronto house prices. Standard two-storey homes rose 8.3 per cent year-over-year to $730,806, while detached bungalows increased by 7.2 per cent to an average price of $611,906. Standard condominium prices also saw strong growth, increasing by 5.4 per cent to $380,453. Looking ahead to the end of 2014, Royal LePage forecasts that prices will rise by 8.1 per cent in the Toronto market.
In Winnipeg, the price of a standard condominiums rose by a healthy 5.3 per cent year-over-year to $209,023 and detached bungalows appreciated by 2.0 per cent to land at $311,015. The standard two-storey was the only housing type to buck this upward trend as prices decreased by 2.4 per cent to an average of $336,241. Royal LePage expects Winnipeg prices to continue to rise by 2.8 per cent for the balance 2014.
Regina posted healthy year-over-year price increases across housing types surveyed. Standard condominiums posted the highest year-over-year gains of 2.7 per cent to $211,000. Meanwhile, the average price for standard two-storey homes increased 2.6 per cent year-over-year to $372,500 while detached bungalows increased by 1.1 per cent to $333,500. Royal LePage forecasts a 2.1 percent increase in Regina prices for the remainder of 2014.
A healthy economy, led by the oil and gas sector, led to surging demand and continued short supply in the Calgary housing market this quarter. Detached bungalow prices increased 9.7 per cent year-over-year to $501,200 and condominiums also saw a robust increase of 9.3 per cent to $286,422. Standard two-storey homes realized healthy gains, increasing by 7.9 per cent to $489,589. Royal LePage predicts a 5.5 percent increase in year-over-year prices by the end of 2014.
In Edmonton, condominiums showed the strongest gains, with the average price increasing 7.8 per cent year-over-year to $236,429, while standard two-storey homes posted a steady increase of 3.8 per cent to $372,112. Detached bungalows remained essentially flat, dropping 0.2 per cent year-over-year to $350,401. Royal LePage forecasts moderate price appreciation of 4.5 per cent in the Edmonton housing market by the end of 2014.
House prices in Vancouver continued on their upward trajectory, with detached bungalows increasing by 5.2 per cent year-over-year to $1,107,290 and standard two-storey homes by 4.6 per cent to $1,204,011. Meanwhile, standard condominium prices remained relatively flat, moving by only 0.3 per cent year-over-year to $491,984. Looking ahead, Royal LePage forecasts that home prices in Vancouver will rise by 7.1 per cent by year-end.