Canada’s real estate market has hit a “soft landing,” according to one of the country’s largest real estate brokerages.
Royal LePage says most Canadian markets are now seeing slower-than-normal house price increases. But the average price of a home still went up between 3.8 and 6.6 per cent on a year-over-year basis in the first quarter of 2015, according to a recent survey from the firm.
Detached bungalows saw the biggest gains, up 6.6 per cent to an average of $405,895, followed by two-storey homes with an increase of 5.3 per cent to $451,462.
Condo prices increased the least, by 3.8 per cent to $261,782.
The firm said it first saw prices softening in its mid-2014 report but two “unanticipated factors” have since disrupted the market: the decline in oil prices and the Bank of Canada’s decision to lower interest rates further to 0.75 as a countermeasure.
Consumer confidence has been shaken by the oil shock — affecting home buying, by extension — but the lower interest rate has helped to offset some of the impact, said Royal LePage president and CEO Phil Soper.
“With these factors combined, we have a soft-landing for housing after several years of robust expansion. We define a soft-landing as a market in which home prices are flat or increasing slightly, giving the economy and family incomes, a chance to catch up.”
The real estate firm said it’s unlikely the pace of home price appreciation will return to levels recorded over the years since the recession, as many buyers rushed into the market to take advantage of historic low interest rates designed to stimulate the economy.
Still, Royal LePage was quick to point out it doesn’t foresee a “sharp decline in home prices,” something that would be bad for the industry as it could deter homeowners from selling.
The decline in oil prices over the past six months has pushed Calgary out of the top three fastest-appreciating housing markets in the country. Meanwhile, Toronto and Vancouver — markets that have been on a tear since the recession — posted near double-digit home price growth over the same period.
“Supply shortages in key parts of the Greater Toronto Area and Vancouver are driving up local prices in an intensified fashion, but these are the exception, not the rule,” Soper said.
“The rest of the country is experiencing a much more subdued residential real estate climate. Even a closer look at surrounding areas of Vancouver reveals that mountain-steep appreciation rates are not a B.C.-wide phenomenon.”
The hot markets of Vancouver and Toronto continue to distort national homes data as many other markets across the country experience a slowdown.
The Canadian Real Estate Association said Wednesday that the national average home price rose 9.4 per cent to $429,144 in March compared to the same month last year; but excluding the country's two hottest markets, that growth was a significantly lower 2.4 per cent, and the average price was $332,711.
Home sales were up 9.5 per cent compared to last March, though the strong growth failed to lift sales above their ten-year average for the first quarter of the year.
“Greater Vancouver and the GTA are really the only two hot spots for home sales and prices in Canada,” said Gregory Klump, CREA’s chief economist.
“Price gains in these two markets are being fuelled by a shortage of single family homes for sale in the face of strong demand.”
Check out the graph below to find out how Royal LePage found home prices in your area fared in the first quarter:
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