An influx of housing inventory and pent-up demand fuel a strong start to the spring market
TORONTO, April 8, 2014 – Real estate brokers across the country saw inventory increase noticeably in the final month of the first quarter of 2014, following a remarkably drab winter for residential real estate activity. The spring market, which seemed on the verge of underperforming, turned a corner in the last weeks of the quarter.
According to the Royal LePage House Price Survey, released today, most regions showed healthy year-over-year price growth, with the average price of a home in Canada rising between 2.5 per cent and 5.4 per cent. In the first quarter, the average price of a two-storey home increased 5.4 per cent to $428,943, while detached bungalows rose 4.4 per cent year-over-year to $380,765. Standard condominiums posted slightly lower gains of 2.5 per cent to $252,174. Regionally speaking, Toronto, Winnipeg, Calgary and Edmonton saw the highest price increases, while parts of Atlantic Canada, with much of its inventory still under snow, posted the lowest gains overall.
“It appears that it took only the slightest hint of spring to bring home-sellers out of hibernation,” said Phil Soper, president and chief executive of Royal LePage. “We are finally seeing the arrival of housing inventory in seasonally appropriate quantities across the nation. When combined with pent-up demand following a particularly long and harsh winter, the stage is set for a robust 2014 spring market. This is particularly good news for buyers, as the home price spikes we have seen in a number of cities should be alleviated by this additional supply.”
Canada’s economy continues to strengthen with the Bank of Canada currently projecting GDP growth of 2.5 per cent in 2014. Major financial institutions including RBC and TD Bank posted economic forecasts that were in line with this projection at 2.5 and 2.3 per cent, respectively. On the jobs front, employment matched the late-quarter rally seen in the housing industry, exceeding expectations and bringing the unemployment rate to 6.9%, matching its lowest level in six years.
“With a series of supportive economic factors at play, we expect the country’s real estate market to continue the strong showing it posted in the second half of 2013,” said Soper. “As the economy strengthens, the federal government is poised to produce its first balanced budget of the post-recession era. Interest rates should remain supportive of the industry for the balance of the year and improving fortunes south of the border has strengthened the U.S. dollar, fueling demand for our relatively more affordable exports.”
“Suggestions of an overheated real estate market and bubble continue within the mainstream dialogue, but are becoming less frequent,” concluded Soper. “Of the core housing types, the condominium segment remains the most vulnerable to short-term price softness in light of increased inventory, but the situation is limited to only a few cities. The medium to longer term prognosis for this housing sector remains very positive.”
In December 2013, Royal LePage released a research report addressing fears of market instability resulting from high volumes of condominium projects and a potential blitz of new inventory in Canada’s largest cities. The report found that while the condo market may experience some turbulence in the short term as we see a transition from very high levels of sales activity to slightly lower start volumes, condominium living plays, and will continue to play, an important and well-established role within the housing markets of Canada’s largest cities. That role will continue to grow, resulting in sustained demand and expansion of inventories through new housing production.
Regional Market Summaries
The Halifax housing market continued to experience steady price growth this quarter, despite relatively flat unit sales and inventory levels. Standard two-storey homes witnessed the greatest appreciation of all housing types surveyed, with the average price rising by 1.9 per cent year-over-year to $325,933. Standard condominiums also posted modest gains, edging up 1.4 per cent to $218,950. Prices for detached bungalows prices remained essentially flat, increasing by only 0.3 per cent to $295,500.
The St. John’s real estate market witnessed mixed results this quarter, as detached housing prices continued their ascent upward, rising 4.1 per cent year-over-year to $302,000 and 4.0 per cent to $408,333, respectively. During the same period the average price for standard condominiums declined by 3.0 per cent to $300,000.
In Montreal, detached homes also posted healthy increases with the average price for standard two-storey homes increasing 3.6 per cent year-over-year to $406,179, while detached bungalows increased 3.3 per cent to $294,557. Prices for standard condominiums remained relatively flat, decreasing 0.1 per cent to $239,561.
Severe winter weather limited activity and moderated price growth in the Ottawa housing market this quarter. The average price for detached bungalows increased 2.2 per cent year-over-year to $395,667 and standard two-storey homes increased 2.0 per cent to $398,500. Condominium prices dropped slightly, declining 1.4 per cent over the same period to $258,500.
Toronto housing prices continued on their upward trajectory in the first quarter, with scarce inventory and multiple-offer scenarios driving prices up in desirable neighbourhoods. Detached bungalows and standard two-storey homes both saw robust year-over-year price appreciation, rising 4.1 per cent to $589,250 and 6.8 per cent to $716,698, respectively. Standard condominiums posted a more modest increase of 1.5 per cent to an average price of $364,979.
A shortage of quality resale homes on the market drove prices up in the Winnipeg market this quarter. The average price for standard two-storey homes and standard condominiums saw significant growth with a 5.1 per cent increase to $325,072 and 5.3 per cent increase to $203,118 respectively. Meanwhile detached bungalows increased by a modest 1.2 per cent year-over-year to $306,507.
An increase in the inventory of new-build detached homes stabilized prices in the Regina housing market. Prices of both detached bungalows and standard two-storey homes were relatively flat year-over-year, increasing by 0.2 per cent to $330,000 and 0.3 per cent to $379,000, respectively. Standard condominium prices saw moderate growth, rising by 3.6 per cent to $216,000.
Sustained high demand coupled with inventory shortages fuelled strong price appreciation in the Calgary housing market. The average price for a standard two-storey home experienced the greatest growth year-over-year, surging by 7.5 per cent to $472,644. During the same period the average price for detached bungalows jumped by 6.3 per cent to $480,222 and standard condominiums increased by 5.3 per cent to $274,700.
Significant price growth across all Edmonton housing types drove more consumers to the condominium market in the first quarter. Prices of standard condominiums led the market, climbing by 6.9 per cent year-over-year to $224,250. Standard two-storey homes posted an impressive 5.5 per cent increase in average unit price to $371,000 while detached bungalows appreciated by 5.3 per cent to $341,651.
Continued strong demand for single-family homes pushed prices upward in the Vancouver market. Detached bungalows saw the largest year-over-year price increase, climbing 4.8 per cent to $1,062,318. The average price for standard two-story homes saw an increase of 2.9 per cent to $1,148,473. Continued builder development in the condominium market kept prices of standard condominiums relatively flat at a 0.3 per cent increase to $482,800.
Royal LePage’s quarterly House Price Survey shows the annual change of prices for key housing segments in select national markets. See the chart.
Source: Royal LePage Canada