Price surges in Canada's biggest cities mask an otherwise temperate national market

Royal LePage forecasts steady price gains for the full year, inventory shortages in large cities continue

TORONTO, July 9, 2014 /CNW/ - 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.

Royal LePage's quarterly House Price Survey shows the annual change of prices for key housing segments in select national markets.

	Detached Bungalows				Standard Two Storey				Standard Condominium
Market	Q2 2014 Average	Last Quarter Avg	Q2 2013 Average	Bungalow % Change	Q2 2014 Average	Last Quarter Avg	Q2 2013 Average	2 Storey % Change	Q2 2014 Average	Last Quarter Avg	Q2 2013 Average	Condo % Change
Halifax	292,167	295,500	288,667	1.2%	327,300	325,933	333,167	-1.8%	217,500	218,950	215,950	0.7%
Charlottetown	175,000	173,000	173,000	1.2%	205,000	205,000	205,000	0.0%	130,000	130,000	128,000	1.6%
Fredericton	200,000	203,000	207,000	-3.4%	215,000	215,000	220,000	-2.3%	145,000	151,000	158,000	-8.2%
Moncton	149,648	153,000	153,000	-2.2%	152,302	135,000	143,300	6.3%
Saint John	179,150	181,425	177,828	0.7%	256,038	278,145	279,922	-8.5%	155,000	213,427	163,900	-5.4%
St. John's	299,667	302,000	290,000	3.3%	408,000	408,333	392,667	3.9%	306,000	300,000	309,333	-1.1%
Montreal	296,250	294,557	288,868	2.6%	404,357	406,179	397,643	1.7%	239,611	239,561	239,528	0.0%
Ottawa	401,667	395,667	396,483	1.3%	402,250	398,500	398,983	0.8%	257,500	258,500	259,417	-0.7%
Toronto	611,906	589,250	571,013	7.2%	730,806	716,698	674,905	8.3%	380,453	364,979	361,128	5.4%
Hamilton	240,416	234,127	222,761	7.9%	310,757	301,289	294,928	5.4%
Winnipeg	311,015	306,507	305,010	2.0%	336,241	325,072	344,598	-2.4%	209,023	204,643	198,431	5.3%
Regina	333,500	330,000	330,000	1.1%	372,500	371,500	363,000	2.6%	211,000	215,000	205,500	2.7%
Saskatoon	375,000	363,750	369,250	1.6%	399,250	393,500	394,250	1.3%	261,333	265,000	254,000	2.9%
Calgary	501,200	480,222	456,900	9.7%	489,589	472,644	453,789	7.9%	286,422	274,700	261,933	9.3%
Edmonton	350,401	341,651	350,975	-0.2	372,112	371,000	358,461	3.8%	236,429	224,250	219,321	7.8%
Vancouver	1,107,290	1,062,318	1,052,500	5.2%	1,204,011	1,148,473	1,151,250	4.6%	491,984	482,800	490,475	0.3%
Victoria	467,000	487,000	453,100	3.1%	478,000	491,000	461,000	3.7%	272,000	282,000	267,400	1.7%
National	406,454	380,765	386,547	5.2%	440,972	428,943	419,614	5.1%	258,501	252,174	248,750	3.9%

2014 Royal LePage Market Survey Forecast

Average House Price % Change
Market	Province	2014/2013 % Change	2014 Forecast	2013	2012
Halifax	NS	1.9%	280,000	274,880	270,742
Montreal	QC	1.7%	326,000	320,490	325,655
Ottawa	ON	2.5%	368,000	358,876	352,610
Toronto	ON	8.1%	566,500	524,089	498,973
Winnipeg	MB	2.8%	276,000	268,382	255,058
Regina	SA	2.1%	319,000	312,355	301,145
Calgary	AB	5.5%	461,000	437,036	412,315
Edmonton	AB	4.5%	360,500	344,977	334,318
Vancouver	BC	7.1%	822,000	767,765	730,063
National		5.1%	402,000	382,466	363,740

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 website at www.royallepage.ca. Current figures will be updated following the complete tabulation of the data for the second quarter of 2014. A printable version of the second quarter 2014 survey will be available online on August 6, 2014. 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 over 15,000 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 and 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

Ray McIlroy, Kaiser Lachance Communications, 647-680-8316, [email protected]; Tammy Gilmer, Director, Public Relations and National Communications, Royal LePage Real Estate Services, 416-510-5783, [email protected]