Housing market expected to stay hot, TD says

Calgary’s housing market — coming off another recordbreaking month — is expected to stay hot through 2014, says TD Economics.

The bank, in a report released Thursday, said continued employment and population gains have the local market well-positioned for continued expansion, with Calgary and Edmonton forecast to post the fastest home price growth over the next two years.

TD economist Diana Petramala, the report’s author, said Calgary’s housing market, hard hit by the recession in 2008/09, has soared since its delayed recovery began in late 2011.

“Since, home sales have been growing at a double-digit pace and Calgary has been one of the hottest markets this spring season,” she said.

The Calgary Real Estate Board said the average MLS sale price for residential properties in the city reached $491,928 in June, eclipsing the previous record of $486,531 set only a month earlier. Prices were up 5.5 per cent from a year ago.

Average sale price records were also set in the single family ($562,382) and condo apartment ($350,712) categories. June’s 2,670 MLS sales were an increase of 15.8 per cent from a year earlier.

The real estate board said last month’s sales spike was due, in part, to last summer’s floods.

“Last June was not a normal month, so it’s difficult to compare the two,” Bill Kirk, CREB’s president, said in a release. “The historic floods of 2013 forced residents and business owners from their homes and places of work. It’s not surprising that many Calgarians were not focused on purchasing or listing their home at that time.”

The TD report said Calgary remains the most affordable major market in Canada outside of cities in the Atlantic region, despite the ongoing price increases.

The bank said its housing affordability index, which measures mortgage payments on an average priced home as a percentage of average household income, puts Calgary at 17.3 per cent, 10 percentage points below its 2008 peak.

Ann-Marie Lurie, CREB’s chief economist, said the continued price growth has boosted listings, which should bring more balance to the local market.

“What we have seen happening is that we had the prices increasing obviously at a stronger than expected rate because of the market tightness,” said Lurie. “There just hasn’t been the supply there.

“Now, with more supply coming in the resale market from new listings, as well people having options in the new home sector, that should help moving forward.”

Luxury home sales in Calgary also reached new highs for a second straight month, with 104 properties selling for at least $1 million in June, 10 better than May.

The first half of 2014 saw 462 luxury sales in Calgary compared to 391 during the same period last year, said Mike Fotiou of First Place Realty.

The TD report upgraded the bank’s forecast for the overall Canadian real estate sector, predicting home prices will gain an average of five to six per cent by the end of 2014. In February, the bank had expected Canadian home sales to flatten out, and called the market overvalued by about 10 per cent. It did not give an estimate on how much it thought prices would rise or drop. That earlier forecast was based on the belief that mortgage rates would creep up in the spring, but rates still sit near record lows and continue to prop up demand.

In May, the national average resale home price grew 7.1 per cent year over year — surpassing its 10year average growth rate. Looking past the short- to medium-term forecasts, Petramala said the Canadian real estate market is still expected to cool when interest rates rise and the number of available homes increase.

“As home buyers have more choice, they will also have more bargaining power and price pressure will ease,” said Petramala. “These features would be consistent with the makings of a soft landing in Canada’s housing market.”