Royal LePage predicts house and condominium prices will continue to see modest gains for the remainder of the year.
The average price of homes and condominiums in Canada saw a slight increase in the second quarter of 2013, according to the recently released Royal LePage House Price Survey and Market Survey Forecast. Average house prices increased between 1.2 and 2.7 per cent, while condo prices rose 1.2 per cent.
The survey shows continued gains in markets across the country. In the second quarter, standard two-storey homes and detached bungalows both saw an increase of 2.7 per cent to $419,614 and $386,547, respectively, for year-over-year average prices. The average price for a standard condominium rose to $248,750.
Though there has been concern about the direction of Canada’s housing market in recent months, Royal LePage is projecting a three per cent increase in housing prices for 2013.
Since the recent changes to mortgage lending rules, a number of analysts have forecasted large downward price adjustments. Debt levels, housing affordability in cities such as Toronto and Vancouver, as well as international economic uncertainty have also played a factor in these predictions.
“As we have stated consistently since the current market downturn began late in the second quarter of 2012, this is a normal cyclical correction that brings fewer home sales and softer prices,” says Phil Soper, president and CEO of Royal LePage. “Those hoping their predictions of a bursting bubble and cataclysmic drops in home values come true are out of luck again.”
Recent signals from major financial institutions in Canada and the U.S. also point to a turn in the tide. In recent weeks, two of Canada’s largest home loan lenders, Royal Bank of Canada and TD Bank Group, raised their mortgage rates. At the same time, the U.S. Federal Reserve hinted that it may start winding up monetary stimulus later this year should economic improvements continue.
With improvements to the economy, Soper says interest rates will likely shift, which will be beneficial to the housing market.
“Rising rates would be driven by a strengthening economy, reduced unemployment and improved consumer confidence,” he says. “Much of the dampening effect that would come with a transition towards higher rates has already been ‘priced in’ to both consumer attitudes and financial institutions’ current lending policies.”
The condo sector is also at the forefront of discussions about the health of Canada’s real estate market. Though there is a fear of oversupply in major centres, prices have remained consistent, or shown year-over-year gains, in most Canadian cities in the second quarter.
“We believe condominiums will be a housing class of increasing importance in the future,” says Soper. “In the short-term, we anticipate some market uncertainty and moderate price adjustments, particularly in Toronto, which is working through a supply spike; however, the medium and long-term prognosis remains very positive. Demographic and city planning trends, in conjunction with shifting consumer preferences, remain supportive of this housing category.”
