Canada's real estate market to cool slightly after strong first half
- Typical annual market cycle was front-loaded in Q1 and Q2 but increasing supply of homes for sale will bring average Canadian home prices down in third and fourth quarters -
TORONTO, July 7 /CNW/ - Canada's residential real estate market will start to slow in the second half of 2010 after two quarters of strong price appreciation and sales activity, according to the Royal LePage House Price Survey and Market Survey Forecast released today. While market fundamentals remain strong across most major centres in Canada, sales activity was overly 'front-loaded' in the first half of the year and is expected to cool off for the third and fourth quarters. Prices are also expected to steady in the second half of the year.
In the second quarter, the average price of a detached bungalow in Canada was up 9 percent to $331,868, compared to a year ago. Over the same period, standard two-storey homes rose 8.7 percent to $367,835 while standard condominiums rose 7.3 percent to $230,014. Royal LePage is forecasting that by the end of 2010, home price appreciation will average 6.8 percent year-over-year, while home sales will increase by just over one percent compared to 2009.
"We have seen an unusual pattern of activity in the housing market over the past 12 months, with the market experiencing a surge of activity and price increases that peaked in the fall of 2009 rather than spring. Early 2010 has followed a more typical seasonal pattern with prices and activity peaking in the second quarter," said Phil Soper, president and chief executive, Royal LePage Real Estate Services. "An expected increase in the supply of homes on the market will now bring stabilization in prices and in some cities we will see both prices and unit sales decline towards the end of the year. This should not be interpreted as a severe correction but rather a natural reaction to the market having peaked quite early this year."
The surge of activity in the first and second quarters of 2010 corresponds to a number of significant regulatory and financial industry changes that affected home buyers over the same period, including an increase in interest rates in the spring, tightening of mortgage lending rules for first time homebuyers and investors, and the lead up to the introduction of the HST in British Columbia and Ontario.
"Anecdotal evidence suggests that these factors may have prompted an increase in housing market activity in early 2010, as people sought to get out ahead of the changes," Soper said. "Moving into the next six months, key economic indicators such as employment growth will continue to bolster consumer confidence and help to ensure a fundamentally healthy housing market. Home prices will remain flat or decline slightly in most cities, but will be more likely to hold their value or increase in energy-producing economies such as Alberta."
Among the regions that posted year-over-year price increases in the second quarter, Canada's two biggest markets posted some of the largest. Average prices in Vancouver were up 16.6 to 19.1 per cent while prices in Toronto rose by an average of 7.7 to 11.4 per cent. In recent years these markets, however, have tended to react much more aggressively to external stimulus and affordability is expected to erode after the sharp price increases posted in Q2. As a result, downward pressure on prices is expected for the remainder of the year.
Similarly, the country's sharpest price increases occurred in St. John's, NL, with prices up an average of 18.4 to 19.6 per cent. A strong local economy driven by the oil sector combined with low inventory led to the robust increases, but eroding affordability and interest rates that are expected to rise will likely lead to more moderate price appreciation in the second half of the year.
REGIONAL MARKET SUMMARIES
The residential real estate in market in Halifax saw year-over-year price gains across all three housing types surveyed for the second quarter of this year. Higher prices were supported by a nearly 20 per cent drop in inventory levels over the previous year and by buyers looking to finalize sales prior to interest rate and tax hikes.
Montreal saw consistent year-over-year price appreciation across all housing types surveyed in the second quarter. While first-time homebuyers were active at the beginning of the year, the last two months of this quarter saw a shift in activity to second and third-time buyers as affordability eroded. Activity may slow down in July but will increase in September as first-time homebuyers return to the market.
The real estate market in Ottawa has remained strong as prices increased across all housing types this quarter over the second quarter of 2009. The market continues to benefit from strong immigration and steady employment in the public sector. Prices are expected to soften later this year as inventory levels start to build.
Toronto house prices are higher this quarter than prices seen in the same period last year. The market strength continued from the last half of 2009 as buyers were motivated by low interest rates and a desire to beat the HST. The Toronto market is expected to experience a modest decline in prices in the second half of the year.
Detached bungalows, standard two-storey homes, and standard condominiums in Winnipeg all saw price gains this quarter as compared to the second quarter of 2009. Price increases were also seen across almost all neighbourhoods in the city though market activity is expected to slow as the year continues.
Inventory levels in Regina are currently at 25 per cent above historical levels, contributing to a more modest year-over-year price increase this quarter compared to other parts of the country. Rising interest rates and growing inventory are offset by low vacancy rates and strong employment levels. Homes are often selling below asking price, and people may be slower to trade up to more expensive homes, which will likely lead to a relaxed market for the remainder of 2010.
The real estate market in Calgary is beginning to lean in favour of the buyer. Price levels for detached bungalows and standard two-storey homes are moderately higher in the second quarter of 2010 compared to last year, but average prices for standard condominiums have dropped slightly over the same period. Inventory levels have been high and price increases are expected to remain nominal for the remainder of 2010.
Prices for detached bungalows and standard two-storey homes in Edmonton increased modestly over second quarter levels of 2009, while standard condominium prices have dropped. As markets continue to stabilize and inventory levels return to normal, prices are expected to decrease slightly over the rest of this year.
Despite inventory levels rising by 30 per cent, pending HST implementation and anticipated increases in interest rates have driven demand in Vancouver's housing market. The average prices for all three housing types surveyed rose between 16.6 and 19.1 per cent in year-over-year analysis for this quarter. Continued high inventory levels are, however, expected to put downward pressure on prices during the second half of 2010.
Royal LePage's quarterly House Price Survey shows the following annual change of prices for key housing segments in select national markets:
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Detached Bungalows
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Q2 2010 Last Quarter Q2 2009 Bungalow
Market Average Avg Average % Change
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Halifax 250,333 246,833 235,333 6.4%
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Charlottetown 162,000 162,000 160,000 1.3%
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Moncton 150,760 158,200 158,000 -4.6%
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Fredericton 182,000 182,000 172,000 5.8%
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Saint John 195,000 228,000 201,476 -3.2%
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St. John's 238,333 228,025 200,000 19.2%
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Montreal 255,906 248,613 235,523 8.7%
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Ottawa 352,917 326,667 325,417 8.5%
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Toronto 481,933 477,867 432,433 11.4%
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Winnipeg 261,625 259,313 237,750 10.0%
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Regina 282,000 278,125 272,900 3.3%
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Saskatoon 331,250 328,250 312,250 6.1%
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Calgary 419,978 419,433 401,600 4.6%
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Edmonton 320,857 302,857 302,143 6.2%
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Vancouver 905,000 906,045 760,000 19.1%
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Victoria 520,000 511,400 466,000 11.6%
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National 331,868 328,977 304,552 9.0%
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Standard Two-Storey
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Q2 2010 Last Quarter Q2 2009 2 Storey
Market Average Avg Average % Change
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Halifax 287,167 278,267 277,333 3.5%
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Charlottetown 196,000 196,000 190,000 3.2%
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Moncton 139,300 137,250 134,200 3.8%
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Fredericton 205,000 205,000 210,000 -2.4%
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Saint John 270,000 299,000 268,000 0.7%
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St. John's 330,000 313,775 276,000 19.6%
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Montreal 357,833 350,667 332,917 7.5%
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Ottawa 353,083 346,833 325,417 8.5%
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Toronto 589,857 577,810 533,748 10.5%
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Winnipeg 293,875 277,375 265,050 10.9%
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Regina 259,500 267,000 245,000 5.9%
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Saskatoon 355,500 366,250 337,250 5.4%
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Calgary 422,078 432,178 400,167 5.5%
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Edmonton 347,914 343,571 328,571 5.9%
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Vancouver 995,250 987,500 846,000 17.6%
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Victoria 483,000 475,000 446,000 8.3%
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National 367,835 365,842 338,478 8.7%
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Standard Condominium
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Q2 2010 Last Quarter Q2 2009 Condo
Market Average Avg Average % Change
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Halifax 170,000 169,250 164,000 3.7%
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Charlottetown 122,000 122,000 120,000 1.7%
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Moncton
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Fredericton 151,000 145,000 140,000 7.9%
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Saint John 162,000 137,238 158,283 2.3%
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St. John's 255,000 241,850 215,333 18.4%
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Montreal 226,048 221,278 209,311 8.0%
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Ottawa 237,750 231,000 211,750 12.3%
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Toronto 326,913 329,200 303,650 7.7%
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Winnipeg 164,000 162,143 143,700 14.1%
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Regina 184,000 185,500 180,375 2.0%
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Saskatoon 232,833 232,000 219,000 6.3%
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Calgary 251,756 263,533 252,344 -0.2%
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Edmonton 199,667 208,833 203,833 -2.0%
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Vancouver 487,250 458,000 417,750 16.6%
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Victoria 280,000 295,000 275,000 1.8%
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National 230,014 226,788 214,289 7.3%
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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 80 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. A printable version of the second quarter 2010 survey will be available online on August 6th, 2010.
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. Historical data is available for some areas back to the early 1970s.
About Royal LePage
Royal LePage is Canada's leading provider of franchise services to residential real estate brokerages, with a network of nearly 14,000 real estate professionals in over 600 locations across Canada. Royal LePage is the only Canadian real estate company to have its own charitable foundation; the Shelter Foundation which is dedicated exclusively to funding women's shelters and violence prevention and education programs. Royal LePage is managed by Brookfield Real Estate Services, and is part of a brand family that includes Royal LePage, Real Living, Johnston and Daniel, and La Capitale Real Estate Network. An affiliated company, Brookfield Real Estate Services Fund, is a TSX listed income trust, trading under the symbol "BRE.UN."
For more information visit www.royallepage.ca.
For further information: Tammy Gilmer, Director, Public Relations and National Communications, Royal LePage Real Estate Services, 416-510-5783; David Kaiser, Senior Vice President, Fleishman-Hillard Canada, 416-645-3682
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