TORONTO – Royal LePage says the price of a Canadian home is expected to rise by a relatively modest 2.9 per cent on average in 2015 as price appreciation slows across the country.
Toronto is expected to lead the pack when it comes to price increases this year, with the realtor saying the average home price in Canada’s largest city is forecast to rise by 4.5 per cent, although that would be well behind last year’s pace.
Vancouver is expected to see the second-biggest average jump in prices, up 2.8 per cent, followed by a 2.4 per cent gain in Calgary, 0.6 per cent in Montreal and 0.5 per cent in Halifax among several of the major centres surveyed across the country.
The realtor says economic factors, including the plummeting price of oil, are likely to cause home prices to grow at a slower pace, particularly in Western Canada.
In 2014, prices for detached bungalows rose the most, up 6.7 on average across the country in the fourth quarter compared with a year earlier, followed by an average six per cent gain for two-storey homes and 4.5 per cent for condos.
Edmonton’s condo market saw the biggest increase, shooting up 12.2 per cent to an average of $250,953 per unit. Prices in Calgary also ballooned, with standard condos shooting up 9.1 per cent year-over-year to an average of $311,644 in the latest quarter.
In Toronto, prices of detached bungalows increased by 11.6 per cent from a year ago to an average of $647,535, while prices of two-storey homes advanced 8.6 per cent to an average of $745,062.
In Vancouver, the average price of a detached bungalow and of a two-storey home each grew by more than seven per cent, to an average of $1,124,642 and $1,233.182 respectively.
Home prices remained relatively flat in Winnipeg and softened in Regina, where the average price of two-storey homes dropped 6.8 per cent year-over-year to $345,000.
Royal LePage predicts that prices will continue to accelerate rapidly in Toronto in 2015 for a variety of reasons, among them a surge in demand for Ontario’s exports thanks to the lower loonie and the robust economy south of the border.
Labour market trends and unsatisfied demand from prospective homebuyers who were outbid in 2014 will also fuel higher home prices in the Toronto area.
Meanwhile, the sharp decline in the price of oil will slow the growth in home prices in Western Canada, according to the report.
Royal LePage says a potential interest rate hike and possible changes to mortgage rules by the federal government could also pose risks to the country’s real estate sector if they materialize.
“Ultimately the biggest threat to the Canadian housing market is a decline in consumer confidence, which could result from worsened employment prospects or decreased purchasing power, be it real or perceived,” president and chief executive Phil Soper said in a statement.
“In this light, we will be watching market developments closely in the regions most negatively impacted by oil price declines, such as Alberta, Saskatchewan and Newfoundland.”
Buyers in western Canadian cities could benefit from lower prices in the short term, but Soper says the trend is unlikely to last.
“Over the longer term, we foresee a return to regional home price appreciation that is above both the historical average and national trends in general, when energy markets recover,” he said.
“In the interim, slowed growth in the price of homes will be a welcome sign for many people in the West, especially in pricey markets like Vancouver where first-time buyers have been frustrated by a hyper-competitive market and home prices that have escalated at a feverish pace.”