Home prices in Toronto and Vancouver are on pace to increase nearly 10 per cent in 2015 while Calgary’s are falling less than expected, meaning the nationwide average price should grow 6.1 per cent this year, according to a new forecast from Royal LePage.
The Royal LePage House Price Survey and Market Survey Forecast analyzed sales in 90 markets during the second quarter of this year and found that prices increased year-over-year by 7.5 per cent to $438,938 for a detached bungalow, 6.8 per cent to $471,002 for a standard two-storey house and 3.9 per cent to $268,583 for a standard condominium.
Royal LePage president Phil Soper said the second-quarter averages were heavily influenced by Toronto and Vancouver, which have “prosperous labour markets driving demand for housing that is in limited supply.”
In Toronto the average detached bungalow price increased 12.9 per cent to $712,622, the standard two-storey home price rose 11.6 per cent to $834,728 and the average condominium price rose 5.0 per cent to $402,901. Royal LePage predicts that will translate into a 9.6 per cent increase in 2015 prices over 2014 for Canada’s largest city.
In Vancouver, detached bungalows rose in price 12.6 per cent to $1,247,125, standard two-storey homes went up 13.6 per cent to $1,368,125 and condominiums increased 6.0 per cent to $521,425. Vancouver’s market will therefore grow 9.4 per cent in 2015, according to the report.
Calgary’s market was expected to take a big hit from declining oil prices that have led to job losses, but the year-over-year decline in Q2 has been relatively small, according to Soper.
Detached Calgary bungalows declined in price by 0.9 per cent to $496,689, standard two-storey homes dropped 3.1 per cent to $474,239 and condos increased 1.6 per cent to $291,022. Royal LePage predicts a 2.4 per cent decrease in prices there in 2015.
“We believe the oil-shock adjustment to home values in Calgary has for the most part already taken place,” Soper added.
In an interview on BNN's The Street on Tuesday, Soper called Calgary Canada's "twitchiest market," with prices fluctuating constantly over the years.
Soper said people have been able to hold on to their home values in Calgary this year thanks to an increase in jobs in the city and a lowered vacancy rate.
Soper said the robust sales do not support an interest rate cut by the Bank of Canada, which is expected to announce Wednesday whether it will drop its key rate from 0.75 per cent in an attempt to stimulate the economy.
"There is such a thing as too much of a good thing," Soper said. "We just don't need to throw additional fuel on those fires right now."
Soper said the markets in Toronto and Vancouver make up a third of the housing activity in the country. For now, Soper said there are "very manageable price increases" in both markets. Soper cautioned that throwing in an external stimulus like an interest rate cut could lead to a "hard correction."
High-value markets like those in B.C. and Ontario could sharply plunge, Soper warned.
"You're stretching the limits of demand creation through pricing."
Soper also singled out the strength of the home market in Hamilton, Ont., which experienced a 10.9 per cent increase in detached bungalow prices and a 13 per cent increase in two-storey home prices, according to the report.
Other cities saw smaller year-over-year changes.
Average prices for detached bungalows by city with year-over-year change:
Average prices for standard two-storey homes by city with year-over-year change:
Average prices for standard condominiums by city with year-over-year change:
