Home prices in Canada are expected to rise significantly in the second half of 2018 after appreciation slowed at the start of this year, a report from Royal LePage says.
Compared to the second quarter of 2018, the aggregate price of a home in Canada will rise by 1.9% in Q3 and by 4.5% in Q4, the Royal LePage House Price Survey and Market Survey Forecast said.
That will bring the forecasted aggregate home price to $709,297 in the fourth quarter, up from $678,675 in Q2.
The forecast comes after a slowdown in home price appreciation in Q2, mainly because of a “softness” in the GTA where prices have dropped year over year, said Royal LePage in a release.
The real estate firm says its original 2018 forecast expected a slowdown in the market because of the new mortgage stress test rules.
“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,” said Phil Soper, president and CEO of Royal LePage, in the release.
“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.”
The report found that Greater Montreal and suburban Vancouver had some of the highest home prices increases year over year in Q2. Aggregate (weighted average of median prices of all housing types) home prices rose by 5.9% in Greater Montreal, surpassing the national average for the first time in seven years. Cities in Ontario’s Golden Horseshoe also had significant price increases as buyers looked for homes in more affordable areas.
The price of a home rose 2% year over year in Q2, the report says, compared with a 6.2% year-over-year increase in Q1.
The year-over-year rise in Q2 home prices is as follows according to housing type:
- median price of a two-storey home rose 0.8% to $720,504;
- median price of a bungalow increased 1.8% to $512,979; and
- price of condos rose 8.1% to $435,421.
Royal LePage is forecasting the following aggregate home price increases:
- in the GTA, the price is expected to rise 2.1% in Q3 to $838,984 and rise 5.6% to $867,826 in Q4;
- in Greater Montreal, the price is forecasted to rise to 1.8% in Q3 to $398,220 and 2.8% to $402,345; and
- in Greater Vancouver, the price is expected to rise to 1.5% in Q3 to $1,289,120 and 3.6% to $1,315,314.
Read the survey forecast here.
June housing starts
The Canada Mortgage and Housing Corp. says the annual pace of new home building increased in June, boosted by a jump in multi-unit projects.
The federal housing agency says the seasonally adjusted annual rate of housing starts increased to 248,138 units in June, up from 193,902 in May.
The increase came as the seasonally adjusted annual rate of urban starts climbed 29.9% in June to 228,844.
Multiple urban starts increased 46.4% to 172,845, while single-detached urban starts fell 3.5% to 55,999 units.
Rural starts were estimated at a seasonally adjusted annual rate of 19,294 units.
The six-month moving average of the monthly seasonally adjusted annual rates was 222,041 in June, up from 216,701 in May.
The housing starts data “reinforces the case for tightening monetary policy when the BoC is expected to raise its overnight lending rate by 25bps to 1.5% tomorrow…,” said Derek Holt, vice-president of capital market economics at Scotiabank Economics, in a report.
In a separate report, Statistics Canada said Tuesday the value of permits issued by Canadian municipalities increased 4.7% to $8.2 billion in May.
The value of residential permits increased 7.7% to $5.5 billion, the second-highest value on record, following the $5.7 billion worth of permits issued in October 2016.
Meanwhile, the value of non-residential building permits fell 0.7% in May to $2.7 billion.