Housing market to remain hot through 2016
Knowledge economies contributing to hot sales in Toronto and Vancouver
“I believe it is the highest value put forward by a serious forecasting agency since the turn of the century.” PHIL SOPER ROYAL LEPAGE CEO
Continued low interest rates have one of the country’s biggest real estate brokers backtracking on its earlier prediction of a slower housing market in the second half of the year.
Royal LePage expects Toronto area housing prices to be 14.9 per cent higher in the last quarter of 2016, compared to the same period last year.
That, along with a 27-per-cent forecast increase in Greater Vancouver home prices is helping push the company’s national year-end quarter prediction to 12.4 per cent.
“I believe it is the highest value put forward by a serious forecasting agency since the turn of the century,” said Royal LePage CEO and president Phil Soper.
Earlier, Royal LePage had been predicting about a 7-per-cent national increase in the final quarter, he said.
“In our own forecasting you’d have to go back into the high inflation era of the 1980s before you’d see a number that large. It’s even more astounding if you look at the rise in value in real dollar terms compared to inflation,” he said.
“Over the long term, home prices in Canada have appreciated at 5 per cent per year over 50 years. Inflation has run at about half that. So real increases after inflation have been 2 to 3 per cent,” he said.
The climbing price is partly a product of the simultaneous growth of Toronto and Vancouver markets.
“For the first time for the last 16 years that we’ve seen strong price appreciation out of our two big and expensive cities,” he said.
Soper credits low interest rates along with the underlying economies of B.C. and Ontario. The growth of knowledge economies in a time when “Brand Canada” is strong is a big contributor to the hot Toronto and Vancouver markets, said Soper.
Prices rose 9.5 per cent nationally in the second quarter of the year, according to the report released Wednesday. In Toronto that was a 10.2 per cent increase with average prices at $656,365 compared to $595,730.
Still, Toronto remained relatively calm compared to Vancouver.
Home prices there rose a staggering 24.6 per cent year over year. The Royal LePage report notes that the search for affordable homes there is pushing up the price of larger condos with 1,000 sqor more. That suggests that families are being priced out of detached homes.
“In the GTA, this trend has not yet taken hold, suggesting buyers are still predominantly moving ‘out’ to surrounding regions, versus ‘up’, in search of relatively affordable housing options,” said Soper.
Foreign investment is increasing in both Toronto and Vancouver, Royal LePage research suggests that it is probably below 10 per cent of sales. Soper said it’s closer to 5 per cent.
“To me that rings true,” he said. “It’s also true that even though 5 per cent is a small portion of 100, it is enough to influence the overall market.”