Canadian Home Buyers Continue to Catch their Breath in the Third Quarter of 2018
TORONTO, October 16, 2018
TORONTO, October 16, 2018 – According to the Royal LePage House Price Survey and Market Survey Forecast released today, year-over-year home prices made modest gains in many regions across Canada in the third quarter of 2018. The national trend was largely influenced by price appreciation in Greater Vancouver, while property in the Greater Toronto Area experienced continued year-over-year price declines, with modest gains in value when compared to the previous quarter. Meanwhile, the Greater Montreal Area saw the highest year-over-year home price appreciation rate of the three largest Canadian metropolitan areas studied.
The Royal LePage National House Price Composite, compiled from proprietary property data in 63 of the nation’s largest real estate markets, showed that the price of a home in Canada increased 2.2 per cent year-over-year to $625,499 in the third quarter of 2018. When broken out by housing type, the median price of a two-storey home rose 1.4 per cent year-over-year to $736,337, while the median price of a bungalow climbed 1.5 per cent to $519,886. Condominiums continued to see the highest rate of appreciation nationally when compared to the detached segment, rising 6.7 per cent year-over-year to $441,240.
Looking ahead, Royal LePage is projecting a further uptick in home price appreciation in the fourth quarter, forecasting a 1.5 per cent increase in the aggregate price of a home in Canada over the next three months.
“Positive economic fundamentals, supported by a new agreement on trade, should bolster consumer confidence across Canada and stoke demand in the nation’s real estate market,” said Phil Soper, president and CEO, Royal LePage. “Dangerously overheated regions have cooled considerably this year, while home prices have remained remarkably resilient. This is the soft landing that policy makers were hoping for.”
“I am concerned that the slower market will cause housing supply issues to be shuffled aside for other priorities,” Soper continued. “The return of runaway home prices in the country’s largest markets remains a real threat. Not this year, but in the near future. Job growth is strong, Canada is attracting more of the best and brightest from around the world and the large millennial cohort is putting increasing pressure on our limited new housing stock. It is imperative that all levels of government address looming supply shortages, particularly in affordable housing.”
After more than a year of intense negotiations, the federal government reached an agreement with the U.S. and Mexico on regional trade. Widely seen as a good outcome for the Canadian economy, the USMCA is expected to be signed into law before year end.
“More confident that their jobs are secure, the new USMCA agreement has removed a widespread veil of uncertainty that was acting as a drag on large purchase decisions,” said Soper. “On the other hand, the trade deal paves the way for the Bank of Canada to raise interest rates. Overall, this is a positive development for housing industries on both sides of the border.”
The Canadian economy is on solid footing, although 2018 is staged to see a lower expansion rate when compared to last year. Double-digit home appreciation has disappeared from the Greater Toronto Area or Greater Vancouver real estate markets. Price appreciation in the Greater Montreal Area is strong, but nowhere near the extremes witnessed in the GTA and Greater Vancouver. Condominium prices in the City of Toronto and City of Vancouver regions have also moderated.
“After a number of years where our major real estate markets were tilted decidedly in favour of home sellers, 2018 has provided relief for many purchasers, particularly first-time buyers,” said Soper. “Our research indicates that the desire to own a home remains strong with younger families. Single-digit price appreciation makes pursuing the dream of home ownership a realistic proposition for many.”
During the third quarter, Ontario continued to see noticeable differences between appreciation rates in the Greater Toronto Area and surrounding Golden Horseshoe cities and beyond. Despite some price relief in the GTA, buyers – particularly young families – from the region are venturing out to other Southern Ontario cities in search of more affordable homes, where price points are still significantly lower. This trend is consistent with the findings of the Royal LePage’s Peak Millennial Survey, which found that, nationally, over half (52 per cent) of those surveyed would look to the suburbs when purchasing a property, especially when it comes time to raise a family (59 per cent), while 61 per cent stated that they would be willing to move to another city or suburb where property is more affordable.
In contrast, over the same period, the aggregate price of a home in the GTA remained relatively flat year-over-year, depreciating 0.4 per cent to $836,402. The City of Toronto maintained solid ground, increasing by a healthy 5.2 per cent, while nearly every suburban region studied, except for Mississauga, posted year-over-year price declines. However, quarter-over-quarter, the aggregate price of a home in the GTA rose 1.3 per cent. By the end of the fourth quarter, Royal LePage expects the aggregate price of a home in the GTA to rise to $853,097, a further 2.0 per cent over the third quarter of 2018.
“The GTA is emerging from a housing correction that was triggered by a combination of eroding affordability and government intervention,” continued Soper. “The introduction of the mortgage stress test in particular slowed activity in Toronto’s ‘905’, bringing lower prices to the over-heated suburban region. Quarter-over-quarter trends are pointing to the end of this correctional cycle and the beginning of a modest recovery in the region.”For the entire announcement, please click here.