The price of a home in Canada increased 13.3% year-over-year in Q3 to $628,411, finds the Royal LePage House Price survey.
And home prices in the Greater Toronto Area (GTA), Greater Vancouver, the Greater Montreal Area, Calgary and Ottawa all rose at rates between 1.5% and 3.5%.
Despite the rise in prices, the “Canadian housing market is enjoying a Goldilocks moment – not too hot, and not too cold,” says Phil Soper, president and CEO, Royal LePage in a release. “For the first time since 2011, we are seeing real estate in all five of our largest cities appreciate at a manageable, healthy clip.”
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Soper adds rising interest rates and a strong Canadian dollar should help to keep a lid on major market price appreciation. “Marginally higher borrowing costs should dampen domestic demand somewhat, and with less currency-adjusted purchasing power, foreign buyer activity is off peak levels and will likely stay that way in the near-term,” he says.
Housing by city
Toronto and the GTA
During the third quarter, the GTA saw the largest year-over-year home price increase of any major Canadian market, surging 21.7% on the back of strong gains at the beginning of 2017. The aggregate price of a home in the GTA is $860,295, while the price of a home in the City of Toronto rose 21.8% to $861,397.
The market experienced a sharp drop in sales volumes beginning in April 2017, which continued through much of the third quarter. With underlying employment and economic growth on solid footing, the Toronto market began to grow again in August.
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Potential buyers who were previously on the sidelines taking a wait-and-see approach have now jumped back into the market after realizing prices did not drop as certain market watchers had anticipated. On the supply side, some sellers who had attempted to capitalize on an uncharacteristically strong spring have taken their homes off the market. Together, these trends have caused the region to revert to a more balanced market where supply and demand have stabilized in the majority of areas.
“A severe shortage of listings introduced unsustainable home price inflation into our two largest markets beginning in 2015,” says Soper. “Affordability eroded rapidly, concerned policy makers reacted with measures to slow demand, and sales volumes plummeted. Market corrections were triggered in Vancouver first, and some 10 months later, in Toronto.”
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He adds, “Toronto home prices are much lower than those we see in Vancouver, and the overall size of the market is considerably larger. Waning foreign investment should impact the Toronto market less severely. We expect the correction to be shorter in comparison to what was experienced last year in B.C.’s Lower Mainland.”
Ottawa is turning out to be a major economic success story in 2017, given the heightened levels of hiring by the federal government. As of September, the city’s 5.8% unemployment rate sits below the national average, and it appears to be one of the few cities that has shrugged off the province’s new housing rules. Over the quarter, the aggregate price of a home in Ottawa increased by 7.9% year-over-year to $441,453.
Quebec is now in the midst of what economists, and the province’s finance minister, refer to as a “virtuous circle.” The province’s economy has been improving over the last few years, and confidence among businesses and individuals is rising, with both choosing to spend and invest, creating jobs and further stimulating the economy. Further, the region is increasingly becoming a technology centre of excellence, attracting industry giants such as Google, Amazon and Facebook.
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As a result of a stronger economy, the aggregate price of a home in the Greater Montreal Area rose 6.6% to $384,055. Montreal Centre saw the highest year-over year home price appreciation with an increase of 14.3% to $511,129, and home prices in Montreal West rose by 5.4% over the same period to $422,515.
Calgary and Edmonton
Alberta’s economy continues to rebound from its recession, and drilling activity has come back from last year’s levels. The price of West Texas Intermediate oil has averaged over US$49 per barrel this year, and the Alberta government is forecasting a price of US$55 per barrel in its 2017 to 2018 budget. Over the past year, Alberta has added 13,000 jobs, and full-time employment has grown by 31,500.
When looking to the housing market, many regions in the province have benefited from this recovery, with the aggregate price of a home in Calgary and Edmonton rising 5% and 4% year-over-year to $479,211 and $389,330, respectively.
Forecasters continue to raise their expectations for British Columbia’s growth, with the province poised to lead or come close to leading all provinces in GDP this year, creating new jobs and stimulating growth within the province’s residential real estate market.
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During the third quarter of 2017, the aggregate price of a home in Greater Vancouver increased 2.5% year-over-year to $1,229,133. Over the same period, the City of Vancouver saw an increase of 2.2% to $1,439,652.
Housing by type
When broken down by housing type, the median price of a standard two-storey home in Canada rose 13.9% year-over-year to $748,049; and the median price of a bungalow grew 9.5% to $525,781.
Nationally, condominium prices increased 15.2% to $413,670 on a year-over-year basis, and have begun to appreciate faster than any other housing segment in large urban centres such as Toronto and Vancouver. This is likely to continue for the foreseeable future and begin a trend in other cities. The overall affordability of condominiums continues to attract first-time homebuyers and purchasers looking for attractively-priced real estate as new mortgage regulations, interest rate increases and higher home prices have effectively limited purchasing power.
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“We expect single home buyers, couples or families with one child to favour condominium living,” says Soper. “With the arrival of a second child, many young families will still follow their parents’ footsteps and head to the suburbs.”
He adds, “Regardless of where they live, the sheer number of peak millennials in Canada will shape our real estate markets over the next decade. Developers and planners will certainly respond with housing product that meets the needs of this influential cohort of real estate consumers.”