[Royal LePage] Canada's Housing Market Moves to Moderation

by Yvonne von Jena | July 14, 2017

Royal LePage released their 2017 Q2 House Price Survey and Market Survey yesterday, which is powered by Brookfield RPS data. The report indicates that Q2 Canadian residential real estate market is experiencing moderation with Vancouver, Calgary, and Edmonton markets rising, while the Greater Toronto Area experiences a temporary slowdown.

The National Picture

The report notes that the majority of Canada’s metropolitan markets are displaying expansionary trends. According to the Royal LePage National House Price Composite, the average price of a home in Canada increased 13.8% year-over-year to $609,144 in Q2 of 2017. These metrics can be further broken down by different housing styles:
  • Two-Storey Home: +14.6% year-over-year to $725,391
  • Bungalow: +10.7% year-over-year to $511,965
  • Condominium: +13.4% year-over-year to $397,826

Looking Forward

Royal LePage anticipates that the national aggregate price of a home will continue to increase in 2017. Royal LePage’s President and CEO, Phil Soper says that “Following a period of unprecedented regional disparity in activity and price appreciation, we are now seeing a return to healthy growth in the majority of Canadian housing markets”. Optimistic for the market’s future, Soper states, “The white-hot markets are moderating to very warm; the depressed markets are beginning to grow again. Canadian housing is in great shape – a statement that I certainly did not make last quarter.” RLP Forecasts

The Canadian Economy

According to Royal LePage, the overall health of the Canadian economy has been a significant contributor to the stability of the country’s real estate market in the second quarter of 2017. Canada’s GDP is expected to exceed the 2.6% growth rate previously forecast by the Bank of Canada. Furthermore, the unemployment rate reported is at a nine-year low.

Bank of Canada Raising Interest Rates

As a result, the Bank of Canada yesterday increased the overnight rate one-quarter of a percentage to 0.75, the first interest rate hike in seven years. Royal LePage views this as a significant monetary gesture and signal of the country’s economic strength.

Canadian Debt

While the ratio of debt to disposable income is relatively high, it has declined to 166.9%, and Canadians’ interest-only debt service ratio was a record low 6.1%. According to the Canada Mortgage and Housing Corporation, mortgage delinquency rates in the country’s hottest markets, Toronto (12 basis points) and Vancouver (15 basis points), were less than half of the national average (34 basis points).

A Deeper Look into Canada’s Major Markets:

  • Greater Toronto Area (GTA)
    • The GTA residential real estate market has experienced sales activity that indicates the market is moving towards moderating due to eroding housing affordability and recent government legislation
    • Mr. Soper, says that “The GTA’s recent drop in sales activity may well signal calmer waters ahead for the province. The 20 to 30% year-over-year increases in home values that characterized Toronto and its adjoining areas in recent months are not, in our view, sustainable or healthy.”
  • Vancouver
    • Since the city’s house price decline in August of 2016, the market has started to recover
    • BC’s Lower Mainland upward trajectory is resuming nearly a year after the provincial government implemented regulations that resulted the decline of their residential real estate market
    • The aggregate price of a home in Greater Vancouver increased 2.6% year-over-year to $1,181,309 indicating a marked decline in home appreciation levels from recent quarters
  • Alberta-
    • Alberta has continued to see an economic rebound
    • Calgary experienced its strongest year-over-year home price gains since oil prices fell a few years ago
    • Calgary and Edmonton experienced home price increases year-over-year of 4.4% and 3.8% respectively
  • Saskatchewan
    • The province is benefiting from the positive outlook on the nation’s energy industry and is expected to grow in the upcoming year, but is still in economic recovery mode
    • Both Regina and Saskatoon experience slight year-over-year aggregate home price decreases of 1.3% and 1.7% respectively
  • Winnipeg
    • The city’s aggregate home price remained relatively flat, rising only 0.2% year-over-year
    • Manitoba is among the lowest unemployment rates in the country as of May 2017
    • Royal LePage anticipates that Winnipeg will see a slight appreciation of home prices by the end of the year
  • Quebec
    • The Greater Montreal Area’s housing market showed promising gains in Q2
    • The region has experienced an economic revival and is experiencing their lowest rate of unemployment since 1976, which supports the expanding market
    • The aggregate price of a home in the Greater Montreal area rose 6.2% year-over-year, the City of Montreal rose 9.1% year-over-year, and Quebec City house prices increased 3.8% year over year
  • Atlantic Canada
    • Newfoundland and Labrador’s economies have been on the decline since the downturn in the energy sector
    • St. John’s experienced a 3.1% decline in year-over-year home prices
View Aaggregated regions and the Royal LePage National House Price Composite for 53 Markets