Royal LePage: Canada Home Prices Will Continue To Rise In 2012

First Posted: 01/12/12 08:45 AM ET Updated: 01/12/12 04:26 PM ET

House For Sale
Canadian home prices will continue to go up in 2012, although at a slower pace than they did last year, according to a quarterly report issued Thursday by one of the country's largest real-estate sales organizations.

The price of homes in Canada will continue rising this year, but the hottest markets in Toronto and Vancouver will grow much more slowly, predicts the country's largest real estate broker.

Low mortgage rates will continue underpinning housing demand despite the weakening economy, said Royal LePage Real Estate Services in its annual housing outlook Thursday.

LePage president and CEO Phil Soper said that predictions from housing experts and economists for a drop in prices for 2012 are wrong as mortgage rates remain near record lows.

"Interest rates are the primary driver behind activity levels in the marketplace," Soper said. "People buy homes on the payments that they will be making, not on the sticker price of a particular home."

Most experts believe interest rates will remain stable for this year and well into next as the economy expands sluggishly, but eventually rates should rise with stronger growth.

Royal LePage, which franchises real estate agencies across the country, predicted the national average price for resale homes will rise 2.8 per cent by the end of the year.

The forecast follows a gain of 4.2 per cent in the national average price for a standard two-storey home to $375,427 in the just completed fourth quarter of 2011.

In Vancouver, a standard two-storey home had an average price of $1.1 million in the fourth quarter, up 10.9 per cent from a year earlier, while Toronto saw a home in the same category gain 4.2 per cent to $629,000.

But for 2012, Royal LePage expects prices in Vancouver to gain about 2.3 per cent, while Toronto is expected to see growth of 2.6 per cent.

Regina is expected to lead the country with gains of five per cent for the year, reflecting the sharp growth in Saskatchewan, a province rich in potash, oil, uranium and other resources.

Soper noted that affordability in Vancouver is "on a knife's edge" as people spend upwards of 70 per cent of their post-tax income on their mortgage, property taxes and utilities.

The economic slowdown in China may also affect the market in Vancouver, which has a large Chinese-Canadian population with economic and business ties to China.

"If the investment from China slows, it will change the high-end and certain neighbourhoods," Soper said, noting that the west side of Vancouver, West Vancouver and Richmond have all seen in influx of wealthy Chinese buyers.

The International Monetary Fund has said that Canadian homes on average are 10 per cent overpriced and warned it may be a factor that puts the country's economic recovery at risk.

The Bank of Canada has also repeatedly cautioned prospective buyers to guard against being lured by low mortgage costs because interest rates and therefore monthly payments, will eventually increase as the economy gets stronger.

However Soper suggested that moves made by Ottawa to tighten mortgage lending rules have helped limit the risks.

"The government has made small but significant regulatory changes that have restricted access to the more risky mortgage products post the recession," he said.

The Royal LePage forecast came as the Statistics Canada reported the price of new homes rose again in November, led by gains in Toronto and Montreal.

The government agency's new housing price index rose 0.3 per cent in November, after a 0.2 per cent increase in October. On an annual basis, the index was 2.5 per cent higher in November compared with November 2010.

The largest year-over-year price increases reported by Statistics Canada were in Toronto and Oshawa, Ont., where they were up 6.2 per cent.

In the fourth quarter, the average price for detached bungalows rose 7.2 per cent from a year earlier to $532,137; prices for standard two-storey homes rose 4.2 per cent to $629,188 and standard condos rose 3.4 per cent to $347,659.

In Victoria and Saint John, N.B., house prices were flat or slightly down in the fourth quarter year over year.

In Saint John, detached bungalows fell 2.2 per cent year-over-year to $179,946, while standard two-storey properties slipped 0.3 per cent to $298,076. Condos were the exception, with average prices climbing 16.1 per cent year-over-year to $159,370, although LePage said those increases weren't typical.

In Victoria, standard two-storey homes were unchanged, with prices remaining at $480,000 while detached bungalows slipped 0.8 per cent to $486,000 and condos dropping 1.1 per cent to $282,000.

— with files from David Paddon in Toronto

Loading Slideshow...
  • St. John's, Nfld. -- $125 Per Square Foot

    This four-bedroom, two-bathroom custom-built bungalow in St. John's West End neighbourhood boasts hardwood floors, a covered sundeck and an oversized yard. With an asking price of $349,900 and 2,750 square feet of livable space, this spacious home costs approximately $125 per square foot.

  • Trois Rivieres, Que. -- $127 Per Square Foot

    This five-bedroom, two-and-a-half bathroom house features a double-width garage and a heated inground pool. At approximately 2,750 square feet and an asking price of $349,900, it works out to around $127 per square foot.

  • Winnipeg -- $160 Per Square Foot

    This spacious split-level home in southeast Winnipeg features four bedrooms and three baths, a stone fireplace and a jazuzzi in the master bedroom. It sits on a 142-foot-long, pie-shaped lot. At 2,182 square feet and a $349,900 asking price, it works out to around $160 per square foot. <strong>CORRECTION:</strong> <em>An earlier version of this slide incorrectly listed the price-per-square foot as $600</em>.

  • Red Deer, Alta. -- $248 Per Square Foot

    This five-bedroom, three-bath home features vaulted ceilings, a fireplace and a massive walk-in closet in the master bedroom. At 1,408 square feet -- this average-sized house on the prairie works out to $248 per square foot.

  • Montreal -- $250 Per Square Foot

    This two-story townhouse condo just east of downtown Montreal features three bedrooms and two baths, cherry wood floors and a terrace. At 1,400 square feet and an asking price of $349,000, this condo works out to $250 per square foot.

  • Burlington, Ont. -- $388 Per Square Foot

    This cozy bungalow on the edges of the Greater Toronto Area features four bedrooms, two baths and a long, 175-foot lot. Highlights include a granite countertop and newly finished hardwood floors. At a snug 900 square feet, this house is going for $388 per square foot.

  • Toronto -- $499 Per Square Foot

    This one-bedroom, one-bath condo in Toronto's Entertainment District features a balcony with a southeast exposure. In a sure sign the condo is outfitted with just the basics, the unit's sellers boast of its "brand name appliances" and "frost free refrigerator." At 700 square feet (including the balcony), it works out to $499 per square foot.

  • Vancouver -- $688 Per Square Foot

    This one-bedroom, one-bathroom corner unit in Vancouver's Kitsilano neighbourhood "shows much larger than the square footage," the realtor boasts. That's good, because at 508 square feet, this place is only slightly larger than some of the bedrooms and living rooms available in similarly-priced houses in other markets. The condo boasts "gorgeous mountain views," but it'll cost you -- $688 per square foot.

FOLLOW HUFFPOST CANADA BUSINESS

Filed by Daniel Tencer  |