Canada emerges from "the housing market correction no one noticed"

Oct 10, 2013, 06:00 ET from Royal LePage Real Estate Services

Royal LePage records strong house price gains in the third quarter of 2013

TORONTO, Oct. 10, 2013 /CNW/ - According to the Royal LePage House Price Survey released today, the average price of a home in Canada increased between 1.2 per cent and 4.1 per cent in the third quarter of 2013.

The survey showed a year-over-year average price increase of 3.7 per cent to $418,686 for standard two-storey homes, while detached bungalows rose 4.1 per cent to $381,811. During the same period, the average price for standard condominiums saw a more moderate increase, rising 1.2 per cent to $246,530. Sales volumes surged in a number of regions, as Canadians re-entered the housing market after sitting on the sidelines for more than a year - marking the end of the most significant housing market correction  since the 2008-2009 global recession.

"Canada experienced a significant housing market correction over the last four quarters that most in the nation missed entirely," said Phil Soper, president and chief executive of Royal LePage.  "Many regions experienced dramatic slowdowns in the number of homes trading hands, but news of double-digit unit sales declines went largely unnoticed, over-shadowed by a macabre fascination with the prospect of a U.S.-style home price collapse, which of course never transpired. Our over-heated real estate market of 2011 and early 2012 drove some to the sidelines. Home price appreciation ground to a halt for a year - a necessary breather and predictable market response."

According to the Royal LePage survey, St. John's, Toronto, Winnipeg, Saskatoon and Calgary led the country in home price increases, while Vancouver posted year-over-year price gains across all three housing categories.

"Our housing market turned a corner in the third quarter. Buyers returned to the streets in droves, resulting in a sharp increase in home sales.  In many cities, there simply weren't enough properties on the market to satisfy demand, which put upward pressure on prices for the first time in 2013," continued Soper. "We expect this positive momentum to continue through the all-important spring market of 2014, buoyed by a combination of pent-up demand, increasing consumer confidence and continued low interest rates."

Last month, a number of prominent financial institutions upgraded their projections on Canada's future gross domestic product (GDP) growth. TD Bank raised its outlook for Canadian GDP growth for the third quarter to an annual rate of 2.3 per cent, while maintaining its forecast that full-year growth will be 1.7 per cent in 2013 and 2.4 per cent in 2014. RBC posted slightly higher GDP growth numbers for this year and next of 1.8 and 2.8 per cent, respectively. In the same month Statistics Canada reported that Canada's economy created 59,000 jobs in August, approximately triple what most economists had forecast.

"Job growth begets consumer confidence. An emboldened citizen is more likely to enter into a major financial transaction. Following almost six years of turbulent times, economic fundamentals are pointing to an era of renewed  prosperity. The American economy is on an upward trajectory and businesses in Canada and around the world are finally loosening purse strings and investing in people for growth. This is vitally important for an exporting nation like ours. And as goes the Canadian economy, so goes the residential real estate sector," explained Soper.

"Emerging headwinds for Canada's real estate market include the demographic trend of simply having fewer people of home-buying age than in the 2000s, but this will be offset by immigration and social change.  Baby Boomers are living longer than their parents, extending that generations period of active real estate participation.   At the other end of the scale, single people, and in particular single women, are buying homes earlier and at a faster rate than ever before."

Soper concluded, "while interest rates must of course rise from current historical lows, we anticipate the change to be modest in the medium term. As the country emerges from this extended correctional cycle, we believe the real estate market stimulus previously provided by low interest rates will be replaced by a strengthening labour market and true economic recovery."

Regional Market Summaries

In Halifax, standard two-storey homes and standard condominiums each posted strong year-over-year price gains of 5.9 per cent, landing at $329,333 and $214,000 respectively. Detached bungalow prices saw a more modest gain of 2.0 per cent to $299,000.

Strong activity in all housing types has led to significant price appreciation in the St. John's housing market.  Standard two-storey home, detached bungalow and standard condominium prices each posted substantial gains of 12.1 per cent year-over-year, landing at $400,333, $296,000, and $315,333 respectively.

After a slow start to 2013, house prices started to stabilize this quarter in the Montreal market. Consumer preference for two-storey homes kept demand lower for detached bungalows, resulting in a very modest 0.6 per cent year-over-year increase to $289,306.  Standard two-storey homes witnessed the greatest increase, rising 3.9 per cent to $403,007, while still higher than usual inventory kept standard condominiums to a more moderate 1.2 per cent increase, landing at $239,819.

Mixed results characterized the Ottawa housing market this quarter, with a strong demand for higher-end housing driving prices in detached homes, while increased inventory drove slight price declines in the condominium market. Standard two-storey homes showed steady year-over-year price growth, increasing 2.4 per cent year-over-year to $401,500 while detached bungalows posted a 2.3 per cent increase to $398,417. Standard condominium prices declined by 1.1 per cent to $259,000.

Pent-up demand from a slower start to spring contributed to increased activity in the Toronto housing market over the summer. Detached bungalows and standard two-storey homes both saw healthy year-over-year price appreciation in the third quarter, rising 5.0 per cent to $577,563 and 4.1 per cent to $678,016, respectively. Standard condominiums were essentially flat compared to last year, inching up 0.3 per cent to an average price of $355,483.

A later than usual start to the market this year led to pent-up demand and price increases in Winnipeg in the third quarter.  Standard two-storey homes saw a significant price increase of 8.6 per cent year-over-year to $346,765, while detached bungalows increased 4.2 per cent to $307,069. During the same period, the average price for a standard condominium increased 3.5 per cent to $195,226.

Prices continue to rise, but are beginning to level off in the Regina house market.  Standard two-storey home prices saw the greatest gains, rising 3.5 per cent year-over-year to $372,250. Detached bungalows remained relatively flat, edging up by 0.4 per cent to $336,500, and standard condominium prices also rose slightly, by 0.9 per cent to $212,622.

A sustained period of low housing inventory coupled with a healthy economy and an influx of corporate sector workers has fuelled strong price growth in Calgary.  Average home prices in the city were buoyant in the third quarter with detached bungalows increasing 7.2 per cent year-over-year to $465,411, standard condominiums increasing 5.6 per cent to $263,087 and standard two-storey homes increasing 3.4 per cent to $446,411.

Slowing activity in the Edmonton market has held average housing prices relatively flat. Standard two-storey homes witnessed a year-over-year increase of 1.5 per cent to $362,000, while standard condominiums edged up 0.5 per cent to $203,637. Prices for detached bungalows increased slightly over the same period, rising 0.7 per cent to $337,804.

A resurgence in market activity across all housing types has led to strong price appreciation in the Vancouver market.  Detached bungalows saw a sizeable increase of 5.6 per cent year-over-year to $1,070,000 and standard two-storey homes rose 2.7 per cent to $1,156,500. Standard condominiums were also up, increasing 1.2 per cent to $503,750.

Royal LePage's quarterly House Price Survey shows the annual change of prices for key housing segments in select national markets.

  Detached Bungalows Standard Two Storey Standard Condominium  
Market Q3 2013
Q3 2012
% Change
Q3 2013
Q3 2012
% Change
Q3 2013
Q3 2012
Halifax 299,000 288,667 293,000 2.0% 329,333 333,167 311,000 5.9% 214,000 215,950 202,000 5.9%
Charlottetown 173,000 173,000 172,000 0.6% 205,000 205,000 205,000 0.0% 128,000 128,000 127,000 0.8%
Moncton 148,000 153,000 147,900 0.1% 145,000 143,300 134,600 7.7%        
Fredericton 207,000 207,000 205,000 1.0% 215,000 220,000 220,000 -2.3% 153,000 158,000 158,000 -3.2%
Saint John 176,092 177,828 186,034 -5.3% 278,895 279,922 272,591 2.3% 156,905 158,068 158,225 -0.8%
St. John's 296,000 290,000 264,167 12.1% 400,333 392,667 357,000 12.1% 315,333 309,333 281,333 12.1%
Montreal 289,306 288,868 287,500 0.6% 403,007 397,643 387,786 3.9% 239,819 240,306 236,989 1.2%
Ottawa 398,417 396,483 389,583 2.3% 401,500 398,983 392,167 2.4% 259,000 259,417 261,833 -1.1%
Toronto 577,563 572,263 550,025 5.0% 678,016 676,087 651,594 4.1% 355,483 361,842 354,567 0.3%
Hamilton 228, 901 222,761 214,796 6.6% 294,919 294,928 289,634 1.8%        
Winnipeg 307,069 305,010 294,625 4.2% 346,765 344,598 319,250 8.6% 195,226 198,431 188,714 3.5%
Regina 336,500 330,000 335,000 0.4% 372,250 363,000 359,500 3.5% 212,622 205,500 210,750 0.9%
Saskatoon 366,250 369,250 348,000 5.2% 399,750 394,250 373,500 7.0% 255,000 255,000 252,333 1.1%
Calgary 465,411 457,889 434,267 7.2% 446,411 453,789 431,544 3.4% 263,087 261,933 249,167 5.6%
Edmonton 337,804 347,344 335,429 0.7% 362,000 361,636 356,714 1.5% 203,637 204,755 202,714 0.5%
Vancouver 1,070,000 1,052,500 1,013,500 5.6% 1,156,500 1,151,250 1,125,750 2.7% 503,750 490,475 498,000 1.2%
Victoria 458,000 453,100 450,000 1.8% 462,000 461,000 455,000 1.5% 268,000 267,400 275,000 -2.5%
National 381,811 386,547 366,773 4.1% 418,686 419,614 403,747 3.7% 246,530 248,750 243,607 1.2%

About the Royal LePage House Price Survey
The Royal LePage House Price Survey is the largest, most comprehensive study of its kind in Canada, with information on seven types of housing in over 250 neighbourhoods from coast to coast. This release references an abbreviated version of the survey which highlights house price trends for the three most common types of housing in Canada in 90 communities across the country. A complete database of past and present surveys is available on the Royal LePage website at Current figures will be updated following the complete tabulation of the data for the second quarter of 2013. A printable version of the second quarter 2013 survey will be available online on November 7, 2013. Housing values in the Royal LePage House Price Survey are Royal LePage opinions of fair market value in each location, based on local data and market knowledge provided by Royal LePage residential real estate experts. 

About Royal LePage
Serving Canadians since 1913, Royal LePage is the country's leading provider of services to real estate brokerages, with a network of 14,500 real estate professionals in over 600 locations nationwide. Royal LePage is the only Canadian real estate company to have its own charitable foundation, the Royal LePage Shelter Foundation, dedicated to supporting women's and children's shelters and educational programs aimed at ending domestic violence. Royal LePage is a Brookfield Real Estate Services Inc. company, a TSX-listed corporation trading under the symbol TSX:BRE.

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SOURCE Royal LePage Real Estate Services