Average House Price Appreciation Eases in Second Quarter 2005

Wednesday, July 06, 2005

Price increases slowing but still substantial in most cities

TORONTO, July 6 /CNW/ - Average house prices continued to rise, year-over-year, in all major cities across Canada, according to a second quarter report released today by Royal LePage Real Estate Services. However, the rate of appreciation was less than that experienced in the first quarter and increases were slightly lower over the same period last year.

The average price of a detached bungalow experienced the highest appreciation rising by 7.1 per cent to $262,845, followed by a standard condominium, which increased to $183,397 (+6.5%), and a standard two-storey home, which rose to $318,390 (+5.9%), year-over-year.

Of the national markets examined, 94 per cent of those with detached bungalows increased in value, 94 per cent with standard two-storeys increased in price and 90 per cent with standard condominiums increased, year-over-year.

In most markets, an increase in inventory levels helped to curb unabated price increases. In Montreal, Toronto and the Atlantic, spikes in listings provided buyers with significantly more time and selection over the same period last year, moderating strong seller's market conditions.

"In second quarter, we began to see an inversion of the established geographic trends observed in the Canadian housing market over the past few years," said Phil Soper, president and chief executive officer of Royal LePage Real Estate Services. "Markets such as Vancouver, Toronto and Montreal where there has been frenetic activity, experienced a softening in the acceleration of price increases. While Edmonton and Saskatchewan, markets where appreciation has been growing at a slower pace, took the lead in terms of accelerated price gains."

"While there has been a softening in the acceleration of price increases in many areas, there has been no corresponding softening of demand. In fact, strong economic fundamentals and low interest rates have kept demand for homes among Canadians resolutely high, and this will continue to drive prices higher," added Soper.

Activity levels remained robust across the country as high levels of demand combined with inventory gains to create a robust market. Significant price increases were observed in Victoria and Winnipeg, where double-digit appreciation was sustained across nearly all categories. The Atlantic region reported the most moderate increases along with a good balance between supply and demand.

REGIONAL SUMMARIES

In Halifax, average house prices remained stable, year-over-year. Activity in the city was impacted by cool spring weather and a hesitant attitude among first-time buyers who have grown more cautious amid uncertainty over potential rate increases. The result was fewer sales year-over-year, and a return to more normalized market conditions.

The housing market in Moncton experienced little change year-over-year. Demand, buoyed by a solid economy, new retail business construction and in-migration, remained strong. Activity was particularly strong among empty nesters as a number of them sold their standard two-storey properties in favour of newly built, low maintenance condominiums.

In Saint John, all housing types experienced steady average price growth, year-over-year, fueled by a strong local economy and an emergent labour force. In-migration also prompted a moderate increase in starter home sales. In the trendy Quispamsis, Forest Hill, and Glenn Woodbridge neighborhoods, housing availability remained just below demand.

The housing market in Charlottetown leveled off in the second quarter as both average prices and overall market activity remained stable. Market activity was affected slightly by poor weather and a property tax increase for homes under $150,000 - an added cost that has impacted buyer motivation.

In St. John's, Newfoundland, average house prices continued their upward trend in all categories, year-over-year. Overall, market activity was driven by attractive interest rates and a thriving oil and gas sector.

In Montreal, price appreciation stabilized compared to the double-digit increases of the last few years, and multiple offer situations were rare, allowing buyers to take more time selecting a property.

Ottawa's housing market experienced healthy increases, year-over-year, sustained by a prosperous local economy and continued low interest rates. Inventory levels in Ottawa have increased substantially compared to last year, giving buyers a wide variety of properties to choose from.

Average house prices rose significantly, year-over-year, in Toronto. Inventory levels increased significantly in second quarter, which helped to ease the extremely tight conditions that characterized the Toronto housing market in 2004.

The housing market in Winnipeg continued to experience brisk activity levels in second quarter, causing double-digit price increases in all housing types, year-over-year. Increased inventory levels have not satisfied the number of buyers in the marketplace.

Activity in the housing markets of Regina and Saskatoon continued to build in second quarter, with prices in all housing types rising substantially, year-over-year. Excellent affordability and strong consumer confidence continued to draw buyers into the market.

A vigorous provincial economy, positive in-migration and increased demand contributed to higher average house prices, year-over-year, in Calgary. Demand in Calgary's core outpaced demand in all other areas, creating distinct differences between the housing market in the core and areas outside the city centre.

In Edmonton, continued in-migration and corporate relocations combined with a healthy provincial economy drove average house prices up, year-over-year. Buyers were frustrated by the lack of inventory in second quarter.

Average price gains moderated slightly from first quarter in Vancouver and Victoria as prices rose in both markets, year-over-year. Buyers continued to scour the market for homes in spite of cool and rainy weather. Multiple offers remained common as positive in-migration, low interest rates, economic growth and consumer confidence supported vigorous market activity.

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