Toronto and western Canada: rising home prices

Average home prices showed modest to healthy year-over-year gains in most markets across the country, in the fourth quarter of 2014, according to the Royal LePage House Price Survey and Market Survey Forecast released today.During the quarter, the average price of a home in Canada increased between 4.5 per cent and 6.7 per cent year-over-year. Nationally, the average price of detached bungalows rose 6.7 per cent to $406,218, while standard two-storey homes increased 6.0 per cent to $443,379, and standard condominiums saw a 4.5 per cent increase to $257,624. Against the backdrop of a decidedly mixed macroeconomic environment at home and abroad, Royal LePage expects home prices to increase moderately in 2015, forecasting a 2.9 per cent national increase for the year ahead.Graph of the housing market“In the fourth quarter of 2014, real estate markets unfolded as we anticipated, with modest year-over-year price changes in most regions contrasted against continued steep price increases in Western Canada and Greater Toronto,” says Phil Soper, president and chief executive of Royal LePage. “This follows a similar trend observed in the third quarter of 2014, when we predicted the beginning of a cyclical slowing in home price appreciation, to a pace that better reflects broad economic factors.”

Mixed housing in the Mimico neighbourhood of Toronto

Mixed housing in the Mimico neighbourhood of Toronto

“For our 2015 forecast, we could not ignore the potential impact of the steep decline in the price of oil on housing markets across Canada,” says Soper. “In the immediate term, we anticipate that the natural slowing of home price appreciation we called for in the third quarter of 2014 will be delayed in central Canada and accelerated in the west by recent developments in the energy sector.”For the first half of 2015, Royal LePage expects a confluence of factors and the lower cost of oil to support continued positive price momentum in the Greater Toronto Area, which should experience the highest major market price increases. Ontario’s strengthened export economy buttressed by a flourishing U.S. economy and lower Canadian dollar; improved labour market trends; and unsatisfied demand from countless homebuyers who lost out in 2014 GTA bidding wars are expected to carry the all-important 2015 spring market.

Townhomes in the Mckenzietown neighbourhood of Calgary

Townhomes in the Mckenzietown neighbourhood of Calgary

Meanwhile, in Atlantic Canada, buyers should continue to have the upper hand, with home prices across the region forecast to rise below general inflation.“In contrast to many parts of central Canada, we expect increased opportunity for homebuyers in western Canada, but that opening is unlikely to last,” says Soper. “Over the longer term, we foresee a return to regional home price appreciation that is above both the historical average and national trends in general, when energy markets recover.

Condos in the Yaletown neighbourhood of Vancouver

Condos in the Yaletown neighbourhood of Vancouver

“In the interim, slowed growth in the price of homes will be a welcome sign for many people in the west, especially in pricy markets like Vancouver where first-time buyers have been frustrated by a hyper-competitive market and home prices that have escalated at a feverish pace.”Royal LePage notes that potential threats to the health of the Canadian housing market remain, including sharp increases in interest rates, further federal government intervention in the mortgage market or a serious stumble on America’s road to full economic recovery, but these are all considered unlikely in 2015.Homeowners“Ultimately, the biggest threat to the Canadian housing market is a decline in consumer confidence, which could result from worsened employment prospects or decreased purchasing power, be it real or perceived. In this light, we will be watching market developments closely in the regions most negatively impacted by oil price declines, such as Alberta, Saskatchewan and Newfoundland,” says Soper.Related reading: New home prices continue to riseForecasting house prices a rough scienceLuxury homes see double-digit increase in sales

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