Canada Emerges From “The Housing Market Correction No One Noticed”

According to the Royal LePage House Price Survey released today, the average price of a home in Canada increased between 1.2 per cent and 4.1 per cent in the third quarter of 2013.

The survey showed a year-over-year average price increase of 3.7 per cent to $418,686 for standard two-storey homes, while detached bungalows rose 4.1 per cent to $381,811. During the same period, the average price for standard condominiums saw a more moderate increase, rising 1.2 per cent to $246,530. Sales volumes surged in a number of regions, as Canadians re-entered the housing market after sitting on the sidelines for more than a year – marking the end of the most significant housing market correction  since the 2008-2009 global recession.

“Canada experienced a significant housing market correction over the last four quarters that most in the nation missed entirely,” said Phil Soper, president and chief executive of Royal LePage.  “Many regions experienced dramatic slowdowns in the number of homes trading hands, but news of double-digit unit sales declines went largely unnoticed, over-shadowed by a macabre fascination with the prospect of a U.S.-style home price collapse, which of course never transpired. Our over-heated real estate market of 2011 and early 2012 drove some to the sidelines. Home price appreciation ground to a halt for a year – a necessary breather and predictable market response.”

According to the Royal LePage survey, St. John’s, Toronto, Winnipeg, Saskatoon and Calgary led the country in home price increases, while Vancouver posted year-over-year price gains across all three housing categories.

“Our housing market turned a corner in the third quarter. Buyers returned to the streets in droves, resulting in a sharp increase in home sales.  In many cities, there simply weren’t enough properties on the market to satisfy demand, which put upward pressure on prices for the first time in 2013,” continued Soper. “We expect this positive momentum to continue through the all-important spring market of 2014, buoyed by a combination of pent-up demand, increasing consumer confidence and continued low interest rates.”

Last month, a number of prominent financial institutions upgraded their projections on Canada’s future gross domestic product (GDP) growth. TD Bank raised its outlook for Canadian GDP growth for the third quarter to an annual rate of 2.3 per cent, while maintaining its forecast that full-year growth will be 1.7 per cent in 2013 and 2.4 per cent in 2014. RBC posted slightly higher GDP growth numbers for this year and next of 1.8 and 2.8 per cent, respectively. In the same month Statistics Canada reported that Canada’s economy created 59,000 jobs in August, approximately triple what most economists had forecast.

“Job growth begets consumer confidence. An emboldened citizen is more likely to enter into a major financial transaction. Following almost six years of turbulent times, economic fundamentals are pointing to an era of renewed  prosperity. The American economy is on an upward trajectory and businesses in Canada and around the world are finally loosening purse strings and investing in people for growth. This is vitally important for an exporting nation like ours. And as goes the Canadian economy, so goes the residential real estate sector,” explained Soper.

“Emerging headwinds for Canada’s real estate market include the demographic trend of simply having fewer people of home-buying age than in the 2000s, but this will be offset by immigration and social change.  Baby Boomers are living longer than their parents, extending that generations period of active real estate participation.   At the other end of the scale, single people, and in particular single women, are buying homes earlier and at a faster rate than ever before.”

Soper concluded, “while interest rates must of course rise from current historical lows, we anticipate the change to be modest in the medium term. As the country emerges from this extended correctional cycle, we believe the real estate market stimulus previously provided by low interest rates will be replaced by a strengthening labour market and true economic recovery.”

Regional Market Summaries

In Halifax, standard two-storey homes and standard condominiums each posted strong year-over-year price gains of 5.9 per cent, landing at $329,333 and $214,000 respectively. Detached bungalow prices saw a more modest gain of 2.0 per cent to $299,000.

Strong activity in all housing types has led to significant price appreciation in the St. John’s housing market.  Standard two-storey home, detached bungalow and standard condominium prices each posted substantial gains of 12.1 per cent year-over-year, landing at $400,333, $296,000, and $315,333 respectively.

After a slow start to 2013, house prices started to stabilize this quarter in the Montreal market. Consumer preference for two-storey homes kept demand lower for detached bungalows, resulting in a very modest 0.6 per cent year-over-year increase to $289,306.  Standard two-storey homes witnessed the greatest increase, rising 3.9 per cent to $403,007, while still higher than usual inventory kept standard condominiums to a more moderate 1.2 per cent increase, landing at $239,819.

Mixed results characterized the Ottawa housing market this quarter, with a strong demand for higher-end housing driving prices in detached homes, while increased inventory drove slight price declines in the condominium market. Standard two-storey homes showed steady year-over-year price growth, increasing 2.4 per cent year-over-year to $401,500 while detached bungalows posted a 2.3 per cent increase to $398,417. Standard condominium prices declined by 1.1 per cent to $259,000.

Pent-up demand from a slower start to spring contributed to increased activity in the Toronto housing market over the summer. Detached bungalows and standard two-storey homes both saw healthy year-over-year price appreciation in the third quarter, rising 5.0 per cent to $577,563 and 4.1 per cent to $678,016, respectively. Standard condominiums were essentially flat compared to last year, inching up 0.3 per cent to an average price of $355,483.

A later than usual start to the market this year led to pent-up demand and price increases in Winnipeg in the third quarter.  Standard two-storey homes saw a significant price increase of 8.6 per cent year-over-year to $346,765, while detached bungalows increased 4.2 per cent to $307,069. During the same period, the average price for a standard condominium increased 3.5 per cent to $195,226.

Prices continue to rise, but are beginning to level off in the Regina house market.  Standard two-storey home prices saw the greatest gains, rising 3.5 per cent year-over-year to $372,250. Detached bungalows remained relatively flat, edging up by 0.4 per cent to $336,500, and standard condominium prices also rose slightly, by 0.9 per cent to $212,622.

A sustained period of low housing inventory coupled with a healthy economy and an influx of corporate sector workers has fuelled strong price growth in Calgary.  Average home prices in the city were buoyant in the third quarter with detached bungalows increasing 7.2 per cent year-over-year to $465,411, standard condominiums increasing 5.6 per cent to $263,087 and standard two-storey homes increasing 3.4 per cent to $446,411.

Slowing activity in the Edmonton market has held average housing prices relatively flat. Standard two-storey homes witnessed a year-over-year increase of 1.5 per cent to $362,000, while standard condominiums edged up 0.5 per cent to $203,637. Prices for detached bungalows increased slightly over the same period, rising 0.7 per cent to $337,804.

A resurgence in market activity across all housing types has led to strong price appreciation in the Vancouver market.  Detached bungalows saw a sizeable increase of 5.6 per cent year-over-year to $1,070,000 and standard two-storey homes rose 2.7 per cent to $1,156,500. Standard condominiums were also up, increasing 1.2 per cent to $503,750.

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Source: Royal Lepage Canada