Following a sluggish first half of 2018, Royal LePage expects the housing market to remain in a long-term expansionary cycle, albeit at a slower pace than witnessed over the past couple years.
National House Prices in Q2 2018
The Royal LePage National House Price Composite, which is compiled from proprietary property data in 63 of Canada’s largest real estate markets and is powered by RPS, showed that in the second quarter of 2018:
- Aggregate home prices (all types) in Canada rose 2% year-over-year to $613,968
- Two-storey homes rose 0.8% year-over-year to $720,504
- Bungalows rose by 1.8% to $512,979
- Condominiums posted an increase of 8.1% year-over-year to $435,421
Expectations for National House Prices in Q3 2018
Looking ahead, Royal LePage is projecting an uptick in home price appreciation in the third quarter and forecasts that the aggregate price of a home in Canada will increase 1.9% over the next three months.
“It was a spring market that never blossomed,” said Phil Soper, President and CEO, Royal LePage. “As anticipated in our original 2018 forecast, the new federal mortgage stress-test measures slowed the market to a standstill in much of the country, as some families adjusted their expectations in a world with lower borrowing capacity, and others not impacted by the OSFI regulations moved to the sidelines, adopting a ‘wait and see what happens to home prices’ approach.”
“The market has begun to absorb and adjust to the new realities; we expect an uptick in sales volumes and prices during the second half of 2018,” Mr. Soper continued. “The fundamentals have not changed. The economy is strong and unemployment is very low. We face shortages in our major cities, with many more people looking for homes than the market has available for purchase or rent. Upward pressure on prices will likely return to most markets during the third quarter.”
During the quarter, positive economic fundamentals remained supportive of Canada’s housing markets. However, NAFTA in negotiations and the possibility of a US-initiated trade war is affecting buyers whose employment would be directly affected and they have taken a cautious approach to home ownership.
“There is a cloud of uncertainty hovering over our economy and business environment,” said Mr. Soper. “Notwithstanding the economic drag that difficult American trade negotiations are creating, the national housing market is expected to remain in a long-term expansionary cycle, albeit at a slower pace than we have witnessed over the past couple years.”
The Regional Breakdown
Here is an outline of house price changes and expectations by Royal LePage by region:
- Southern Ontario:
- Cities such as Windsor, Belleville/Trenton, Niagara/St. Catharines, Kingston, London, and Kitchener/Waterloo/Cambridge all saw double and high single-digit year-over-year home price increases in contrast to declines in the GTA.
- “Our experts on the ground are seeing an increasing number of young families that are willing to say goodbye to the big city life, uprooting from the GTA altogether and migrating to more affordable regions in the province,” said Mr. Soper.
- The GTA and the 905:
- “Buyers looking in the GTA have found temporary relief, which is a stark contrast to the runaway price gains that characterized this time of year in 2017,” said Mr. Soper.
- “What we have seen in the first half of 2018 was the continuation of a broad-based residential housing correction that was triggered by declining affordability and government intervention. The effects have been most pronounced in the GTA’s ‘905’, which last year saw rapid price escalation, while the City of Toronto proper has remained relatively stable with moderate year-over-year home price increases,” continued Mr. Soper.
- Prices in the GTA are expected to post third quarter price gains after price declines in the second quarter.
- Quebec and the Greater Montreal Area:
- These areas witnessed strong home price increases, supported by solid economic performance. In the second quarter, the aggregate price of a home in the Greater Montreal Area increased 5.9%, while Montreal Centre increased 7.1%year-over-year – well over the 2.0% aggregate price increase observed nationally.
- The last time that the region’s rate of home price appreciation surpassed that of the national aggregate was in the second quarter of 2011.
- Looking forward to the end of the third quarter, the Greater Montreal Area home price aggregate is forecast to increase 1.8% to $398,220 compared to the second quarter of 2018.
- BC and the GVA:
- British Columbia continues to see the highest home prices and appreciation rates in the country, including solid double-digit home price increases in several Greater Vancouver suburbs.
- Looking ahead, Royal LePage experts in the Lower Mainland, however, have observed slowing market conditions – particularly as a result of new lending regulations and the B.C. government’s introduction of extensive new tax measures targeting the region’s housing market, combined with housing affordability challenges.
- By the end of the third quarter, the aggregate price of a home in Greater Vancouver is expected to rise 1.5% to $1,289,120 compared to the second quarter of 2018.
- Alberta and Saskatchewan:
- The number of cities posted year-over-year price declines.
- When the national mortgage stress test regulations were implemented in January 2018, the region’s tentative housing recovery stalled and the market experienced a setback.
- However, in Calgary home prices are hanging onto recent gains as the employment picture brightens.
- By the end of the third quarter, the aggregate price of a home in Calgary and Edmonton is expected to rise 1.9 and 1.0% to $493,820 and $381,177, respectively, compared to the second quarter of 2018.
- During the same period, the aggregate price of a home in Regina is expected to remain relatively flat in the third quarter, rising 0.2% to $336,479 compared to the second quarter of 2018.
- Winnipeg home prices rose 1.8% year-over-year to $293,932.
- According to Economic Development Winnipeg, the city had a strong year as real GDP increased by 3.7% and the population increased by 1.9%.
- By the end of the third quarter, the aggregate price of a home in Winnipeg is expected to rise 1.3% to $297,817 compared to the second quarter of 2018.
- Atlantic Canada:
- While all regions surveyed saw aggregate home price increases, Charlottetown and Moncton both saw double-digit gains.
- Royal LePage forecasts that the aggregate home price in Halifax will rise 2.6% in the third quarter of 2018 to $324,533 compared to the second quarter of this year driven by low inventory.