Housing market ‘in highly unusual place’
Combination of factors fuelling price increases despite downturn in sales, Royal Lepage finds
Toronto house prices are likely to continue to soften into next year, but will avoid a hotly anticipated major downturn, as “2013 finds the Canadian housing industry in a highly unusual place,” according to a new quarterly housing survey by Royal LePage.
The rare combination of low interest rates, flattening house prices and an improving economy “is not something we’ve seen before,” says Royal LePage president Phil Soper.
“Typically, one of these variables is moving hard in an opposite direc- tion,” he added.
That unusual combination of factors should give buyers some breathing space, as prices flatline and sellers gain some confidence that house values will hold strong, according to the quarterly survey, which shows that despite a significant slowdown in sales since last summer, the average price of a home in Canada increased between 1.2 and 2.4 per cent in the first quarter of this year over last year.
“While some have spoken loudly about impending market volatility and dramatic downward pressure on home prices, we are simply not seeing evidence of this,” said Soper, whose company has a network of 14,000 realtors across Canada. “The current environment is very supportive for housing. Those waiting for big declines in home prices will likely be disappointed.” While such optimism is unsurprising from a real estate company, despite the fact sales have plummeted across the country since last summer — especially in the condo sector — the survey of Canadian house prices in the first quarter does provide hopeful signs. Only the once superhot Vancouver and Victoria housing markets, along with Saint John, N.B., have seen significant downturns in house and condo prices, according the annual survey, which looks at seven types of housing in over 250 Canadian communities. Vancouver bungalows, for instance, which still average just over $1 million, saw price declines of 5.1 per cent while condo prices were down almost 6 per cent in the first quarter of 2013, year-over-year. Saint John’s declines are largely because an influx of new jobs and consumer confidence, which started four years ago, is starting to peter out, noted Soper. St. John’s, N.L., on the other hand, saw some of the biggest price gains in the country, with two-storey houses up an average 10.6 per cent year over year, largely buoyed by move-up and executives buying pricier homes. While Toronto saw a double-digit downturn in buying activity in the first quarter of this year over last, it has yet to seriously impact prices, the survey shows.
The average price of a bungalow was up almost 4 per cent in the first quarter over the same time last year, to $565,700. Even condo prices were up almost 2 per cent yearover-year to an average $359,671, according to the survey.
But Soper noted that those gains are unlikely going forward, even if sales do start to pick up, as Royal LePage expects, later this year.
Soper predicts price gains could slip, possibly into negative territory, by the end of 2013 and would be unlikely to pick up again until into 2015, driving the Toronto market into buyers’ territory for the first time since the 2008 recession.