Natural Slowing of Home Price Appreciation Delayed in Ontario, Accelerated in the West
Steep oil price declines expected to impact key markets
TORONTO, January 14, 2015 – Across the country, average home prices showed modest to healthy year-over-year gains in most markets in the fourth quarter of 2014, according to the Royal LePage House Price Survey and Market Survey Forecast released today.
During the quarter, the average price of a home in Canada increased between 4.5 per cent and 6.7 per cent year-over-year. Nationally, the average price of detached bungalows rose 6.7 per cent $406,218, while standard two-storey homes increased 6.0 per cent to $443,379, and standard condominiums saw a 4.5 per cent increase to $257,624. Against the backdrop of a decidedly mixed macroeconomic environment at home and abroad, Royal LePage expects home prices to increase moderately in 2015, forecasting a 2.9 per cent national increase for the year ahead.
“In the fourth quarter of 2014, real estate markets unfolded as we anticipated, with modest year-over-year price changes in most regions contrasted against continued steep price increases in Western Canada and Greater Toronto,” said Phil Soper, president and chief executive of Royal LePage. “This follows a similar trend observed in the third quarter of 2014, when we predicted the beginning of a cyclical slowing in home price appreciation, to a pace that better reflects broad economic factors.”
“For our 2015 forecast, we could not ignore the potential impact of the steep decline in the price of oil on housing markets across Canada,” continued Soper. “In the immediate term we anticipate that the natural slowing of home price appreciation we called for in the third quarter of 2014 will be delayed in Central Canada and accelerated in the West by recent developments in the energy sector.”
For the first half of 2015, Royal LePage expects a confluence of factors and the lower cost of oil to support continued positive price momentum in the Greater Toronto Area (GTA), which should experience the highest major market price increases. Ontario’s strengthened export economy buttressed by a flourishing U.S. economy and lower Canadian dollar; improved labour market trends; and unsatisfied demand from countless homebuyers who lost out in 2014 GTA bidding wars are expected to carry the all-important 2015 spring market. Meanwhile in Atlantic Canada, buyers should continue to have the upper hand, with home prices across the region forecast to rise below general inflation.
“In contrast to many parts of Central Canada, we expect increased opportunity for homebuyers in Western Canada, but that opening is unlikely to last. Over the longer term, we foresee a return to regional home price appreciation that is above both the historical average and national trends in general, when energy markets recover,” added Soper. “In the interim, slowed growth in the price of homes will be a welcome sign for many people in the West, especially in pricy markets like Vancouver where first-time buyers have been frustrated by a hyper-competitive market and home prices that have escalated at a feverish pace.”
Royal LePage notes that potential threats to the health of the Canadian housing market remain, including sharp increases in interest rates, further federal government intervention in the mortgage market or a serious stumble on America’s road to full economic recovery, but these are all considered unlikely in 2015.
“Ultimately the biggest threat to the Canadian housing market is a decline in consumer confidence, which could result from worsened employment prospects or decreased purchasing power, be it real or perceived. In this light, we will be watching market developments closely in the regions most negatively impacted by oil price declines, such as Alberta, Saskatchewan and Newfoundland,” concluded Soper.
Regional Market Summaries
A continuing inventory surplus has seen a steady market continue in Halifax with housing prices remaining relatively flat in the fourth quarter. The average price of a standard condominium increased by 2.8 per cent year-over-year to $220,500 while standard two-storey homes increased by 1.2 per cent to $333,500. Detached bungalows decreased slightly, dropping by 0.8 per cent to $297,633.
St. John’s experienced contrasting results to the rest of Atlantic Canada as its market saw significant price surges across all housing types. Strong demand in the region saw the average price for standard two-storey homes and detached bungalows both jump 6.9 per cent year-over-year, rising to $428,000 and $316,333, respectively. Standard condominiums also appreciated in the fourth quarter, increasing 6.3 per cent to $335,133.
Montreal saw a relatively flat market in the fourth quarter of 2014, with the average price of detached bungalows increasing 2.1 per cent year-over-year to $297,300. The price of standard condominiums rose slightly with a 1.1 per cent increase to $241,983, while standard two-storey homes were essentially flat with an increase of 0.2 per cent to $402,321.
A healthy and confident Ottawa housing market saw moderate gains in spite of supply continuing to outstrip demand. Detached bungalows and standard two-storey homes increased 2.2 per cent year-over-year to $404,708 and 2.1 per cent to $407,440, respectively. Standard condominiums saw a slight decline in price, dropping 0.6 per cent to $258,817.
Continuing low inventory and a complete lack of a winter slowdown saw significant increases across all major Toronto housing types. Detached bungalows rose 11.6 per cent to $647,535, while prices for standard two storey homes increased 8.6 per cent to $745,062. Standard condominium prices saw an increase of 6.9 per cent year-over-year to $384,680.
The Winnipeg housing market saw relatively flat results continuing in the fourth quarter as inventory sat at a 10-year high. As a result standard two-storey homes saw a modest increase of 2.2 per cent year-over-year to $336,328. Meanwhile detached bungalows saw a slight increase of 0.1 per cent to $303,987 and standard condominiums saw a slight decrease of 0.2 per cent to $207,709.
The Regina housing market also witnessed a softening of prices this quarter. A supply imbalance pushed prices down with standard two-storey homes dropping 6.8 per cent year-over-year to $345,000 and detached bungalows dropping 6.5 per cent to $310,000. These declines were juxtaposed by a 5.4 per cent increase in the average price for standard condominiums, which rose to $223,500.
The Calgary housing market continued to be among the strongest across the country. Demand was strong for homes across all housing types, and continued to outstrip supply. Average prices for detached bungalows jumped 9.1 per cent year-over-year to $511,889 and standard two-storey homes increased 8.5 per cent to $500,320. Standard condominiums also experienced robust growth, rising 9.1 per cent to $311,644.
A competitive landscape and short supply of inventory resulted in continued appreciation of Edmonton housing prices. Strong economic growth in the city saw detached bungalows increase 8.3 per cent year-over-year to an average price of $373,244 and standard two-storey homes surge 9.4 per cent to $397,045. Standard condominiums also saw a sizable increase, rising 12.2 per cent year-over-year to $250,953.
The continued short supply of single family homes became the focus of intense demand from Vancouver buyers in the fourth quarter of 2014. The rare nature of these housing types saw the average price for detached bungalows increase 7.5 per cent year-over-year to $1,124,642 and standard two-storey homes increase 7.1 per cent to $1,233,182, while condominiums rose 3.8 per cent to $511,150.
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