Brief, Mild Correction Forecast for Canada’s Housing Market
The Royal LePage House Price Survey and Market Survey Forecast released in January showed the average price of a home in Canada increased year-over-year between 2.0 and 4.0 per cent in the fourth quarter of 2012. Compared to 2012, fewer homes are expected to trade hands in the first half of 2013, which should slow the pace at which home prices are rising. However, by the end of 2013, Royal LePage expects the average national home price to be 1.0 per cent higher compared to 2012.
While home sales volumes slowed in the second half of 2012, house prices, for the most part, held firm. Some consumers delayed their entry into the market during 2012, faced with economic uncertainty as governments in both the U.S. and Europe struggled with debt management plans and as homes in some regions became less affordable. In the fourth quarter, standard two-storey homes rose 4.0 per cent year-over-year to $390,444, while detached bungalows increased 3.6 per cent to $356,790. National average prices for standard condominiums increased 2.0 per cent to $239,374.
“More home buyers moved to the sidelines as 2012 progressed, as economic uncertainty abroad and reduced affordability became a drag on the market, however house prices proved resilient,” said Phil Soper, president and chief executive of Royal LePage. “Our sturdy domestic economy and encouraging employment trends have emboldened sellers, and some have opted to let market conditions adjust before listing. Simply put, fewer home owners listed their properties in the second half of the year, which kept inventory levels lower, and supported home values.”
While some first-time buyers have been sidelined by new federal mortgage insurance rules introduced in 2012, the cost of mortgage financing remains at historical lows and the desire to own property has not diminished. First-time buyers are adjusting to the new requirements by opting for cheaper homes or saving longer.
Soper concluded, “The silver lining in every real estate market correction is that there is a balance shift. After an extended period of frustrating bidding wars in key, supply-constrained regions, and spring-markets characterized by price increases that make financial planning difficult, Canadian home buyers will see momentum shift in their favour this spring. They should be met with more choice – and stable prices.”
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Average house prices are based on an average of all sub-markets examined in the area, except for the smaller markets of Charlottetown, Moncton, Fredericton, Saint John and Victoria.