News Watch
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Home Prices Still On The Rise The average price of a home in Canada increased between 3.9% and 4.6% in the fourth quarter of 2010, compared to the previous year, as markets shrugged off a lackluster third quarter and returned to a post-recession growth profile. Home values are forecast to continue a moderate and steady climb in many of the country’s key housing markets through 2011 with sales activity skewed to the first half of the year, according to the most recent Royal LePage House Price Survey and Market Survey Forecast. The low cost of borrowing stimulated the housing market in 2010, and this trend is predicted to continue in the first half of this year. The widely held consumer belief that rates will rise in the latter part of 2011 may prompt an increase in buying activity early in the year. “Trends in the housing market continue to be driven by the lingering after-effects of the recession,” said Phil Soper, president and CEO of Royal LePage Real Estate Services. “Canadians realize that interest rates are unsustainably low and that homes will become effectively more expensive when mortgage rates return to normal levels. We will likely see more price appreciation early in 2011 as some buyers complete transactions in advance of anticipated higher borrowing costs.” Soper added, “2011 is expected to unfold much like 2010, when close to 60% of sales volume occurred in the first half of the year in anticipation of interest rate increases that never materialized. However, housing market activity in the first half of 2011 will be modestly closer to the norm, as last year’s phenomenon was made worse by mid-year tightening of mortgage accessibility and the introduction of HST in Ontario and British Columbia.” Regionally, the strongest price appreciation of the cities studied is expected in mid-sized urban centers where affordability is better than the national average. For example, in Winnipeg, St. John’s and Fredericton, two-storey homes below $300,000 are still widely available. Demand in these cities is expected to be strong, putting upward pressure on home values. Cities in Alberta are expected to be among Canada’s strongest performing markets in 2011. Woes in the historically volatile region’s housing market stretch approximately five years, when the Alberta housing market suffered a sharp correction following several years of double-digit price increases. The province’s energy-driven economy staged a comeback in 2010, recovering from the recession-led plunge in oil and gas prices Major employers are expected to steadily increase hiring in 2011 which should attract new residents to the province and put upward pressure on the limited supply of housing. Royal LePage forecasts the average price of a home in Calgary will increase 5.4% through 2011 while Edmonton home prices will increase 3.3%. Home sale transactions are predicted to rise 6.7% in Calgary and 9.1% in Edmonton over the same period. Across Canada, the average price of a home is forecast to rise 3% over the coming year to $348,600 while the number of transactions is expected to drop 2%.
During the fourth quarter of 2010, average home prices either increased or stabilized year-over-year, with Winnipeg, Ottawa, Montreal and St. John’s seeing the biggest gains. Nationally, the average price of detached bungalows rose to $324,531 (up 4.6%), the price of standard two-storey homes rose to $360,329 (up 4.4%), and the price of standard condominiums rose to $226,746 (up 3.9%), compared to the fourth quarter of 2009.
Regional market summaries: The residential real estate market in St. John’s, Nfld. saw strong year-over-year price gains across all three housing types surveyed every quarter this year. However, the market has shown signs of cooling as inventory starts to rise. Detached bungalows and two-storey houses in Montreal saw an 8.7% year-over-year increase in the fourth quarter, while standard condominiums jumped 11.3%. Average prices in Montreal are forecast to increase by a more modest 3% in 2011 as a more balanced market emerges. Ottawa’s housing market saw year-over-year price appreciation ranging between 6.3% and 10% across all housing types surveyed this quarter. However, as inventory grows, Ottawa can expect price increases to be closer to 4% in 2011. House prices surveyed in Toronto increased modestly year-overyear. Standard two-storey homes witnessed the largest increases at 5.6%. Market activity slowed in the second half of the year as buyers rushed to the market in the first half of the year in anticipation of interest rate hikes and HST. For 2011, price increases are expected to be very modest at approximately 1%. Detached bungalows, standard two-storey homes, and standard condominiums in Winnipeg witnessed strong year-over-year price gains this quarter. Detached bungalows performed the strongest, increasing 10.3% compared to the fourth quarter of 2009. Although the market is showing signs of cooling, sellers are still seeing multiple offers and are often receiving higher than their asking price. Winnipeg is expected to maintain its momentum throughout 2011 with prices rising around 7%. CONTRACTOR ADVANTAGE
MARCH/APRIL 2011
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