Hot housing market still sizzles in third quarter

Is your client looking for a deal on a home? In recent weeks, finding the right digs at the right price may have been more challenging than expected. That’s because, says Royal LePage’s house price survey, the Canadian housing market continues to grow.

Vancouver leads the way, with year-over-year home prices increasing by more than 30% last quarter, despite the B.C. government’s new 15% property transfer surtax on foreign nationals, introduced early in the period.

While Ontario considers a similar tax, house price increases in the Greater Toronto Area also remain strong, increasing 13.6%.

Read: Housing starts pick up in most regions

But could Q3 be the last hurrah?

“Relief appears to be on the way,” says Phil Soper, president and CEO of Royal LePage, said in a release. “For months, the number of homes trading hands has been slowing on eroding affordability. And slower sales volumes lead to moderating prices.”

Vancouver’s real estate board reports sales dropped more than 32% in September compared to last year. And tighter controls are expected to provide additional cooling across the country.

To that end, the federal finance minister recently announced new measures, including:

mortgage-rate stress tests for insured mortgages to determine whether borrowers can make payments if interest rates rise or they lose their jobs; and
capital gains tax exemption eligibility for Canadian residents only, on the sale of a principal residence.

Read: Feds close loophole on capital gains exemption

These changes come less than a year after the government increased — to 10% from 5% — the required down payment on residences selling for more than $500,000, and a month after the Office of the Superintendent of Financial Institutions imposed new capital requirements for mortgage insurers.

The change to the capital gains exemption addresses concern that foreign buyers are driving up house prices. Banks are concerned, too: both Bank of Nova Scotia and Bank of Montreal have implemented stricter income verification processes for non-residents.

And, in addition to B.C.’s property transfer surtax, policymakers in that province are considering introducing a vacancy tax on owners of unoccupied homes.

For clients looking for homes, it all adds up to less fun on the open-house circuit.

Location or housing type	Year-over-year % increase in home price	Average home price (Q3 2016)
Canada (aggregate)	12.0%	$545,414
Greater Vancouver	30.6%	$1,194,653
Greater Toronto Area	13.6%	$693,154
Greater Montreal	4.9%	$352,798
Two-Storeys (Canadian aggregate)	13.7%	$649,635
Bungalows (Canadian aggregate)	11.0%	$459,481
Condos (Canadian aggregate)	5.8%	$360,679