2012 closes with modest year-over-year national house price gains
TORONTO, January 8, 2013 – The Royal LePage House
Price Survey and Market Survey Forecast released today showed the
average price of a home in Canada increased year-over-year between 2.0
and 4.0 per cent in the fourth quarter of 2012. Compared to 2012, fewer
homes are expected to trade hands in the first half of 2013, which
should slow the pace at which home prices are rising. However, by the
end of 2013, Royal LePage expects the average national home price to be
1.0 per cent higher compared to 2012.
While home sales volumes slowed in the second half of 2012, house
prices, for the most part, held firm. Some consumers delayed their entry
into the market during 2012, faced with economic uncertainty as
governments in both the U.S. and Europe struggled with debt management
plans and as homes in some regions became less affordable. In the fourth
quarter, standard two-storey homes rose 4.0 per cent year-over-year to
$390,444, while detached bungalows increased 3.6 per cent to $356,790.
National average prices for standard condominiums increased 2.0 per cent
to $239,374.
“More home buyers moved to the sidelines as 2012 progressed, as
economic uncertainty abroad and reduced affordability became a drag on
the market, however house prices proved resilient,” said Phil Soper,
president and chief executive of Royal LePage. “Our sturdy domestic
economy and encouraging employment trends have emboldened sellers, and
some have opted to let market conditions adjust before listing. Simply
put, fewer home owners listed their properties in the second half of the
year, which kept inventory levels lower, and supported home values.”
Soper noted that in the absence of a serious economic event, many
Canadians would adjust their short-term buying or selling timing
according to prevailing market conditions, but that it was rare for
engaged, qualified families to hold out for very long. Buyers are much
more likely to make purchasing decisions based on trigger events such as
marriages, growing families, salary or wage increases or the need to
relocate for a new job. Royal LePage expects the trend towards slower
sales volumes seen in the second half of 2012 to continue through the
first half of 2013. Expectations are that year-over-year comparisons
will begin to show improvement in the third quarter 2013, with sales
volumes that are relatively flat versus 2012, and return to growth in
the final quarter of the year.
“Canada is a realm of sizable, fairly independent regional economies.
Some housing markets, such as those in Alberta and Saskatchewan, are
poised to expand significantly in 2013. We will see a decline in unit
sales and a flattening of home prices in our largest urban markets of
Vancouver and Toronto and that will have a significant dampening effect
on reported national averages,” said Soper.
Soper noted that the housing market is well into a cyclical
correction and that fears of a sharp or drawn out collapse are
unwarranted. Home prices have risen faster than salaries and wages for
three years and the market requires time to adjust.
“A helpful comparison is to reflect on the beginning of 2009 when the
country was in the grips of a very grim global recession,” he said. “It
was a bleak time, with plunging consumer confidence driven by rapidly
spreading unemployment. The meltdown of the American banking and finance
sector had sent their housing market into a downward spiral and our own
real estate market saw home sale transactions fall dramatically. Price
appreciation in Canada ground to a halt, but home values dropped only
slightly. With economic fundamentals such as employment levels
improving, we expect this cyclical correction to be short-lived.”
While some first-time buyers have been sidelined by new federal
mortgage insurance rules introduced in 2012, the cost of mortgage
financing remains at historical lows and the desire to own property has
not diminished. First-time buyers are adjusting to the new requirements
by opting for cheaper homes or saving longer.
Soper concluded, “The silver lining in every real estate market
correction is that there is a balance shift. After an extended period of
frustrating bidding wars in key, supply-constrained regions, and
spring-markets characterized by price increases that make financial
planning difficult, Canadian home buyers will see momentum shift in
their favour this spring. They should be met with more choice – and
stable prices.”
Royal LePage expects that very modest home price appreciation will be
the norm for the next two years, as North American economies gradually
improve and family incomes climb slowly. Improving, but still tepid
growth, in the United States should allow central banks in both
countries to sustain the current low interest rate environment, which is
very supportive of housing market activity.
Regional Market Summaries
In Halifax, low inventory led to healthy
year-over-year price appreciation for all three housing types surveyed.
Average price gains ranged from 3.5 to 7.3 per cent for the housing
types surveyed. At the end of 2013, average house prices in Halifax are
forecast to be 1.5 per cent higher than 2012.
Average home prices in Montreal were up
year-over-year in the fourth quarter of 2012, as higher end units being
sold to an active move-up buyer demographic skewed average prices
upward, while first-time buyers adjusted to meet new mortgage
regulations. At the end of 2013, average house prices in Montreal are
forecast to be 3.8 per cent higher than 2012.
Good employment and affordability resulted in healthy year-over-year price appreciation in Ottawa
with gains ranging from 3.0 to 4.6 per cent. At the end of 2013,
average house prices in Ottawa are forecast to be 1.3 per cent higher
than 2012.
Lack of inventory creating pent-up demand in Toronto
produced strong year-over-year price appreciation in 2012. Detached
bungalows posted an average increase of 4.9 per cent, while standard
two-storey homes increased on average of 6.2 per cent. Standard
condominiums posted a more modest average gain of 2.6 per cent. At the
end of 2013, average house prices in Toronto are forecast to increase a
more modest 1.0 per cent over 2012.
A healthy local economy and low interest rates produced strong year-over-year price appreciation in Winnipeg’s
real estate market with average price gains ranging from 4.7 to 9.9 per
cent. At the end of 2013, average house prices in Winnipeg are forecast
to be 1.0 per cent higher than 2012.
For the second year in a row, two-storey homes in Regina
posted the largest average price increases across all housing types
surveyed in Canada rising 16.8 per cent. Detached bungalows and standard
two-storey homes also posted gains rising 5.3 and 5.9 per cent. At the
end of 2013, average house prices in Regina are forecast to be 4.0 per
cent higher than 2012.
Increased demand and low inventory resulted in healthy year-over-year price gains for standard two-storey homes and detached bungalows in Calgary and Edmonton,
while price appreciation for standard condominiums were relatively flat
in both cities compared to the fourth quarter of 2011. At the end of
2013, average house prices in Calgary are forecast to increase 2.5 per
cent, while Edmonton house prices are expected to increase by 0.6 per
cent compared to 2012.
Low market activity resulted in modest price declines across all three housing types in Vancouver
ranging from 1.3 to 3.6 per cent. At the end of 2013, average house
prices in Vancouver are forecast to further decline 3.0 per cent
compared to 2012.