Canada sees ‘significant price growth’
The country as a whole saw its average home prices spike in the first quarter of 2017, with the average price jumping 12.6% year-over-year to $574,575, according to Royal LePage’s proprietary data which comprises stats from 53 of the country’s major housing markets.
That was led by impressive growth in Ontario; specifically the GTA and outlying markets, with potential buyers forced outside the major city centre to far-flung areas such as the Golden Horseshoe, London, and even Windsor.
Toronto and Vancouver hit fork in the road
After years of heading in the same direction, Toronto and Vancouver’s housing paths have diverged.
“For the first time in several years, real estate markets in Vancouver and Toronto are headed in opposite directions,” said Phil Soper, President and CEO, Royal LePage. “The Vancouver market stalled, as confused consumers took to the sidelines after a series of uncoordinated moves by all three levels of government. With the housing shortage becoming more acute, Toronto easily stepped forward to assume the title of Canada’s most overheated real estate market.”
Vancouver set for rebound
Royal LePage is forecasting a “price reset” in B.C.’s Lower Mainland, following months of price drops due to eroding affordability and housing policy discouraging buyers.
“Vancouver house prices are up compared to the first quarter of 2016, yet this doesn’t tell the complete story,” Soper said. “For weeks now, we have witnessed a steady fall in real estate values in the Lower Mainland, with sales activity down some 40% compared to recent norms.
“There is now reason to believe that the market correction underway in Vancouver may be short-lived. The principal victims of the B.C. government’s foreign buyer tax were Canadians who had planned to sell or buy a home and were frightened away by unsubstantiated rhetoric in which the Chinese were entirely to blame for Vancouver’s housing shortage,” Soper continued. “The reality is that as much as 90% of the housing activity that disappeared overnight in the Lower Mainland after the tax was introduced was from Canadian residents, not foreign investors. Homebuyers are waking up to this reality and may be ready to rush back into the market.”
Government overreach to blame
Although last year’s foreign buyer tax did achieve the government’s goal of cooling Vancouver’s housing market, buyers will likely jump back into the market and create a pendulum effect, according to Royal LePage.
“An unfortunate side effect of heavy-handed regulatory intervention is that we risk market whiplash,” Soper said. “In the coming weeks, it is possible that six months of pent-up demand will be unleashed on the market, sending prices sharply upward again; this when the pre-intervention 2016 trend was a natural market slowdown based on eroding affordability.”
Sounding the warning on Toronto housing policy
“The hasty introduction of new real estate-related regulations or taxes in Ontario, in the absence of data and analysis to support these policy moves, could lead to a sharp price correction, impacting not only household wealth, but damaging the broader Canadian economy as well,” said Soper. “We applaud the Canadian government’s federal budget commitment to partner with the provinces and municipalities to create a coordinated national housing strategy.”
Montreal exhibits strong residential real estate market performance in Q1 2017
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Ontario real estate markets lead the way during substantial quarterly growth, Vancouver prepares for resurgence, and other trends identified in Royal LePage’s Q1 housing report.