01/12/2013 02:47 EST | Updated 01/14/2013 03:20 EST

Calgary Homes: Canadian Market Overvalued, As Average Price In City Hits Record (PHOTOS)

As home prices in Canada are shown to be overvalued, home prices in Calgary have reached record levels

A new report on the state of the world's housing market says that house price overvaluation is especially marked in Canada. The survey from The Economist says that house prices are overvalued when compared to Canadians's earnings and also when compared to rental rates.

Calgary's house price average reached a record level, with an average house cost being $428,655 for 2012, the Calgary Herald reported.

Residential real estate sales in Calgary also saw a 15 per cent increase in volume, compared to the previous year.


SEE: Average Price Houses In Calgary

Photo gallery LOOK: What An Average House Looks Like In Calgary See Gallery

“Calgary’s housing market has finally started to recover,” said Ann-Marie Lurie, Calgary Real Estate Board's chief economist. “While (overall) prices remain shy of the highs recorded in 2007, this is a move in the right direction.”

As average home prices in Calgary hit a record, a global outlook from Royal Bank predicts that the Bank of Canada could boost interest rates by as much as half a percentage point before the end of the year.


Economists have been divided over whether the central bank will boost rates this year or in early 2014.

Signs of improvement in the domestic economy have materialized over the past few weeks, with the December jobs report showing Canada created 40,000 jobs for the month, all of it coming from prized full-time positions. The unemployment rate also fell to its lowest in four years.

Calgary’s 2013 housing sector growth will ease both in terms of sales and price growth, differing from the declines expected on a national level,” Lurie said, adding that 2012 was the first time resale sales returned to more normal levels of activity.

While an increase in housing growth can be expected, it will moderate, says Lurie.

“It is expected that continued weakness in the natural gas sector, combined with the more cautious expansion approach in the oil sector, will persist this year. While economic activity will be strong enough to support moderate housing growth, the notion of an overheated housing market in 2013 is unlikely, given the economic backdrop.”

With files from CP