Canadian House Prices Edge Up in Third Quarter While the Number of Home Sales Fall
First-time buyer activity drops as market adjusts to new mortgage regulations
TORONTO, October 3, 2012 – The Royal LePage House
Price Survey released today showed the average price of a home in Canada
increased year-over-year between 1.8 and 4.8 per cent in the third
quarter of 2012.
Survey findings indicated that 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. During the third quarter, unit 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 the mortgage market
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, first-time buyers will adjust to
tougher mortgage qualifications. The dream of homeownership is very much
alive among young Canadians. They may remain renters for sometime as
they save; some will opt for less desirable neighbourhoods and some will
purchase smaller homes,” added Soper. “In the meanwhile, we will feel
their absence in national sales statistics.”
Canadian consumers were bombarded with troublesome economic news from
around the globe during the period, particularly in the early weeks of
the third quarter. While this has been a drag on the nation’s housing
market and contributed to a slowing in home sale transactions, consumer
confidence appeared to rebound in September, which should support
activity in the important fall market.
“Policy makers in Canada and the United States have confirmed that
the current period of very low interest rates will continue, likely
through 2013. This is very supportive of housing market activity and any
downward pressure on home prices should be minimal,” said Soper. “And
for the first time in six years, sustained positive news from the
American housing market should leave Canadian’s more confident about our
continued economic prosperity.”
National average house price changes do not always reflect the
markets of individual cities, which are closely tied to their local
economies. Case in point, some $29 billion in energy related investments
are now underway in Alberta and Calgary is expected to lead the nation
in economic growth through 2013. The city posted healthy price
appreciation for both detached bungalows and two-storey homes, as
predicted in previous Royal LePage House Price Surveys and Market Survey
Forecasts.
“When the underlying economy of a city is sound and growing, house
price appreciation is sustained. Calgary has enjoyed solid growth in
home values this year. I have also been very pleased with the growth in
commercial brokerage transactions seen in our Royal LePage Commercial
business in the region,” said Soper.
Regional Market Summaries
Halifax’s strong employment levels led to average
price increases across all three housing types surveyed. Detached
bungalows continued to witness the largest year-over-year gains,
increasing 8.9 per cent to $293,000. Detached bungalows in
St. John’s witnessed the largest average price gains across Canada, rising 9.9 per cent, as mega-projects continue to boost migration.
Despite a decline in market activity,
Montreal’s
house prices posted healthy increases in the second quarter of 2012.
Standard two-storey homes witnessed the largest average price increase,
rising 5.5 per cent to $387,786.
Healthy employment in
Ottawa’s technology sector
balanced job loss in the government sector as the region posted healthy
average price increases across all three housing types surveyed, with
house price gains ranging from 4.9 to 6.1 per cent.
Average house price gains in
Toronto ranged from 2.7
to 5.9 per cent for housing types surveyed. Although demand decreased
modestly due to mortgage rule changes, the pipeline of potential buyers
continued to put upward pressure on detached bungalows and standard
two-storey homes. Multiple offers are still very common in the region.
Winnipeg’s real estate market produced average price
gains ranging from 6.5 to 8.3 per cent as first-time buyers remained
fairly active, despite recent changes to mortgage rules.
Low inventory coupled with demand created by low interest rates
continued to put upward pressure on average year-over-year price gains
in
Regina. Standard-two storey homes posted the largest increase of 9.8 per cent rising to an average price of $359,500.
Calgary’s healthy market activity and increased
consumer confidence has led to house price gains in the third quarter
for detached bungalows and standard two-storey homes, increasing 6.5 per
cent and 4.1 per cent respectively. Detached bungalows in
Edmonton
posted strong price gains rising an average of 7.5 per cent in the
third quarter, while two-storey homes increased a modest 1.5 per cent
and standard condominiums declined 0.6 per cent.
In
Vancouver, average house prices posted modest
decreases as market activity slowed down during the third quarter.
Standard condominiums posted the largest decrease, slipping 3.0 per cent
year-over-year to $498,000.
Royal LePage’s quarterly House Price Survey shows the annual change
of prices for key housing segments in select national markets.
Click here to download the chart 
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.
Royal LePage Q3 2012 House Price Survey - Data Chart
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
symbol TSX:BRE.
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