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Conditions are ripe for as strong a market as the post-recessionary rebound
TORONTO, January 9, 2014
According to the Royal LePage House Price Survey and Market Survey Forecast released today, the average price of a home in Canada increased between 1.2 per cent and 3.8 per cent in the fourth quarter of 2013.
The survey showed year-over-year average price increases in the fourth quarter of 2013 of 3.6 per cent to $418,282 for standard two-storey homes and 3.8 per cent to $380,710 for detached bungalows, while the average price of a standard condominium rose 1.2 per cent to $246,530. Prices are expected to maintain healthy momentum into 2014, with Royal LePage projecting a 3.7 per cent increase nationally from 2013 and a shift to a seller’s market in the first portion of the year.
“A few short months ago, the country’s housing market emerged from a year-long correctional cycle of dramatically slowed sales volumes. Later 2013 was marked by a transition to buoyant sales volumes and above average price growth,” said Phil Soper, president and chief executive of Royal LePage. “In the absence of some calamitous event or material increase in mortgage financing costs, we expect this positive momentum to characterize 2014. In fact, we expect a market tipped decidedly in favour of sellers for the first half of the year, after which we project a shift to a more balanced market.”
“We predict continued upward pressure on home prices as we move towards the all-important spring market. In addition to normal demand, housing prices in Canada this year will be influenced by buyers who put off purchase plans in the very soft spring of 2013,” continued Soper. “Talk of a ‘soft landing’ for Canada’s real estate market in the new year is misguided. We expect no landing, no slowdown, and no correction in the near-term. Conditions are ripe for as strong a market as we saw in the post-recessionary rebound of the last decade.”
Canada’s economy is expected to perk up in the year ahead, supported by increased business spending, improving employment and wage prospects, and a pick-up in exports propelled by a recovering U.S. economy and a lower Canadian dollar, among other factors.
“We believe aggressive government intervention, such as further restrictions on first-time buyer’s access to insured mortgage financing, or significant increases in interest rates, is unlikely to occur in 2014,” said Soper. “Our forecast assumes a continuously improving economy, both at home and abroad.”
While most indicators point to a strengthening housing market, some optimism has been overshadowed by fears of instability in Canada’s real estate market resulting from high volumes of condominium projects in major Canadian cities. In light of this growing discussion, Royal LePage released a report in December 2013 analyzing the sustainability of condominium markets in Montreal, Toronto and Vancouver.
The report found that while actual condominium production across these three cities currently exceeds estimated near-term consumer requirements, strong condo market activity has been generated by important fundamentals including low interest rates, strong job creation in central areas of cities, evolving consumer preferences and conditions that can make condo ownership an effective investment opportunity. According to the report, this strong activity “is not sufficient evidence of a housing bubble,” but rather the result of positive economic forces and changes in demand patterns supportive of condominium living.