The Toronto and Vancouver residential real estate markets led the country in strong gains during the fourth quarter of 2015, according to the recent Royal LePage House Price Survey and Market Survey Forecast.
In 2016, Royal LePage expects prices to continue to experience inflation in most markets, but not at the rate they have been increasing recently. Instead, the real estate market is forecast to slow later this year, due in part to the weaker economy in Western Canada and lower affordability in Toronto and Vancouver.
According the Royal LePage’s National House Price Composite, compiled from property value data in 53 of Canada’s largest real estate markets, the price of a home jumped 6.5 per cent year-over-year to $500,688 in the fourth quarter of 2015. The price of a two-storey home increased 7.7 per cent over last year to $610,134, while the price of a bungalow increased 5.4 per cent to $420,082. The cost of a condominium showed the slowest growth, increasing by 3.1 per cent to $341,448. Royal LePage expects the aggregate price of a home in Canada will grow 4.1 per cent in 2016, compared to 2015.
“The frenetic pace of our country’s largest housing markets should moderate throughout the year ahead,” said Phil Soper, president and chief executive officer at Royal LePage, in a press release. “While most of the country will continue to see house value appreciation in 2016, we expect that the pace of price increases in Greater Vancouver and the Greater Toronto Area – where real estate appreciation has significantly outpaced job and wage growth – will settle to a more sustainable, single-digit price increase trajectory.
“Throughout the recent period of depressed oil prices, property prices in Canada’s energy-centric regions, particularly Alberta and Newfoundland and Labrador, were more resilient than most onlookers had expected,” Soper continued. “Consumers, reluctant to sell their homes at what they perceived to be a discount to their true value, simply withdrew from the market, resulting in steady house prices and a drop in unit sales volume. In the coming year, we expect to see the delayed impacts of the slowing economy and rising unemployment on the regions’ housing stock, with moderate declines in home values.”
In 2016, Royal LePage forecasts the price of residential real estate in Canada to be impacted by factors other than housing-specific variables, such as stricter regulations in the mortgage industry. The Bank of Canada is expected to keep its overnight rate level throughout the spring market, extending the availability of low borrowing rates. Although the new Minister of Finance increased the minimum down payment required for mortgage insurance over $500,000 by 10 per cent, Royal LePage believes this change will have a limited impact to the overall market.