Canadian house prices edge up in third quarter while the number of home sales fall

Oct 03, 2012, 06:00 ET from Royal LePage Real Estate Services

First-time buyer activity drops as market adjusts to new mortgage regulations

TORONTO, Oct. 3, 2012 /CNW/ - The Royal LePage House Price Survey released today showed the average price of a home in Canada increased year-over-year between 1.8 and 4.8 per cent in the third quarter of 2012.

Survey findings indicated that the average standard two-storey home in Canada increased 4 per cent year-over-year rising to $403,747, while detached bungalows rose 4.8 per cent to $366,773. Standard condominiums witnessed an increase of 1.8 per cent to $243,607. Most cities in Canada experienced modest price appreciation in the quarter, but fewer homes were sold compared to the same period in 2011.

"A drop in the number of homes trading hands typically precedes a period of softening house prices. Where there is reduced demand, those who want to sell their homes adjust their asking price to stimulate interest. During the third quarter, unit home sales were positive in July, fell 9 per cent year-over-year in August and we are expecting September to show a decline as well," said Phil Soper, president and chief executive, Royal LePage. "We had predicted this cyclical change early in the year, a natural market reaction after a period of strong expansion. Changes to mortgage regulations, which took effect on July 9th, accelerated the correction."

In July, the Minister of Finance announced that the maximum amortization period for insured mortgages would be reduced to 25 years from 30 years. This was the fourth intervention in the mortgage market in just four years and the most impactful. Potential first-time buyers, which in a typical market represent one third to one half of all purchase transactions, felt the changes immediately.

"While hard-hit in the short-term, first-time buyers will adjust to tougher mortgage qualifications. The dream of homeownership is very much alive among young Canadians. They may remain renters for sometime as they save; some will opt for less desirable neighbourhoods and some will purchase smaller homes," added Soper. "In the meanwhile, we will feel their absence in national sales statistics."

Canadian consumers were bombarded with troublesome economic news from around the globe during the period, particularly in the early weeks of the third quarter. While this has been a drag on the nation's housing market and contributed to a slowing in home sale transactions, consumer confidence appeared to rebound in September, which should support activity in the important fall market.

"Policy makers in Canada and the United States have confirmed that the current period of very low interest rates will continue, likely through 2013. This is very supportive of housing market activity and any downward pressure on home prices should be minimal," said Soper. "And for the first time in six years, sustained positive news from the American housing market should leave Canadian's more confident about our continued economic prosperity."

National average house price changes do not always reflect the markets of individual cities, which are closely tied to their local economies. Case in point, some $29 billion in energy related investments are now underway in Alberta and Calgary is expected to lead the nation in economic growth through 2013. The city posted healthy price appreciation for both detached bungalows and two-storey homes, as predicted in previous Royal LePage House Price Surveys and Market Survey Forecasts.

"When the underlying economy of a city is sound and growing, house price appreciation is sustained. Calgary has enjoyed solid growth in home values this year. I have also been very pleased with the growth in commercial brokerage transactions seen in our Royal LePage Commercial business in the region," said Soper.

Regional Market Summaries

Halifax's strong employment levels led to average price increases across all three housing types surveyed. Detached bungalows continued to witness the largest year-over-year gains, increasing 8.9 per cent to $293,000. Detached bungalows in St. John's witnessed the largest average price gains across Canada, rising 9.9 per cent, as mega-projects continue to boost migration.

Despite a decline in market activity, Montreal's house prices posted healthy increases in the second quarter of 2012. Standard two-storey homes witnessed the largest average price increase, rising 5.5 per cent to $387,786.

Healthy employment in Ottawa's technology sector balanced job loss in the government sector as the region posted healthy average price increases across all three housing types surveyed, with house price gains ranging from 4.9 to 6.1 per cent.

Average house price gains in Toronto ranged from 2.7 to 5.9 per cent for housing types surveyed. Although demand decreased modestly due to mortgage rule changes, the pipeline of potential buyers continued to put upward pressure on detached bungalows and standard two-storey homes. Multiple offers are still very common in the region.

Winnipeg's real estate market produced average price gains ranging from 6.5 to 8.3 per cent as first-time buyers remained fairly active, despite recent changes to mortgage rules.

Low inventory coupled with demand created by low interest rates continued to put upward pressure on average year-over-year price gains in Regina. Standard-two storey homes posted the largest increase of 9.8 per cent rising to an average price of $359,500.

Calgary's healthy market activity and increased consumer confidence has led to house price gains in the third quarter for detached bungalows and standard two-storey homes, increasing 6.5 per cent and 4.1 per cent respectively. Detached bungalows in Edmonton posted strong price gains rising an average of 7.5 per cent in the third quarter, while two-storey homes increased a modest 1.5 per cent and standard condominiums declined 0.6 per cent.

In Vancouver, average house prices posted modest decreases as market activity slowed down during the third quarter. Standard condominiums posted the largest decrease, slipping 3.0 per cent year-over-year to $498,000.

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 Q2 2012 Average Last Quarter Avg Q2 2011 Average Bungalow % Change Q2 2012 Average Last Quarter Avg Q2 2011 Average 2 Storey
% Change
Q2 2012 Average Last Quarter Avg Q2 2011 Average Condo % Change
Halifax 293,000 285,833 269,000 8.9% 311,000 317,167 300,000 3.7% 202,000 205,500 196,000 3.1%
Charlottetown 172,000 172,000 166,000 3.6% 205,000 203,000 198,000 3.5% 127,000 127,000 125,000 1.6%
Moncton 147,900 144,000 158,000 -6.4% 134,600 138,000 138,500 -2.8%        
Fredericton 205,000 205,000 201,000 2.0% 220,000 215,000 208,000 5.8% 158,000 157,000 157,000 0.6%
Saint John 186,034 175,037 185,283 0.4% 272,591 279,770 275,220 -1.0% 153,000 149,755 151,500 1.0%
St. John's 264,167 275,625 240,427 9.9% 357,000 368,025 329,933 8.2% 281,333 287,700 257,740 9.2%
Montreal 287,500 281,161 275,000 4.5% 387,786 384,804 367,500 5.5% 236,989 236,528 236,333 0.3%
Ottawa 389,583 388,917 370,750 5.1% 392,167 392,000 374,000 4.9% 261,833 259,667 246,750 6.1%
Toronto 558,900 560,187 527,833 5.9% 660,115 668,829 626,243 5.4% 359,673 363,588 350,050 2.7%
Winnipeg 294,625 303,250 276,500 6.6% 319,250 321,875 299,875 6.5% 188,714 190,000 174,286 8.3%
Regina 335,000 320,500 316,500 5.8% 359,500 347,500 327,500 9.8% 210,750 207,750 198,000 6.4%
Saskatoon 348,000 351,125 335,000 3.9% 373,500 379,500 358,750 4.1% 252,333 255,667 235,000 7.4%
Calgary 434,267 432,322 407,756 6.5% 431,544 425,456 414,722 4.1% 249,167 247,056 254,456 -2.1%
Edmonton 335,429 327,857 312,000 7.5% 356,714 353,764 351,429 1.5% 202,714 201,000 203,857 -0.6%
Vancouver 1,013,500 1,087,125 1,022,375 -0.9% 1,125,750 1,178,750 1,142,500 -1.5% 498,000 507,000 513,500 -3.0%
Victoria 450,000 460,000 480,000 -6.3% 455,000 461,000 465,000 -2.2% 275,000 280,000 277,000 -0.7%
National 366,773 376,311 349,974 4.8% 403,747 408,423 388,218 4.0% 243,607 245,825 239,300 1.8%

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 Web site at Current figures will be updated following the complete tabulation of the data for the third quarter 2012. A printable version of the third quarter 2012 survey will be available online on November 2 2012.

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 14,000 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 & 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