OTTAWA — Canada’s housing market, while no longer red-hot, remains on steady ground, according to a report by Royal LePage.
The real estate services firm said Tuesday that home prices in the third quarter of this year saw growth of less than five per cent, year-over-year, “which is historically typical of balanced real estate markets.”
The average price of a Canadian bungalow in the three-month period ending in September was $324,531, up 4.6 per cent from a year earlier, Royal LePage said. The average two-storey was up 4.4 per cent to $360,329, and the rate for a condominium rose 3.9 per cent to $226,481.
Phil Soper, chief executive of Royal LePage Real Estate Services, said while annual price growth was slightly lower than five per cent in the last quarter, it’s basically in line with that level when factoring in a lower rate of inflation.
In the early part of this year and latter part of 2009, double-digit price growth, year-to-year, was the norm. The Canadian Real Estate Association recorded a surge of more than 20 per cent in October 2009.
These strong gains, as the economy was rebounding from recession while enjoying historically low interest rates, had some fearing Canada was experiencing a housing bubble.
“A few weeks or a few months of unusually high period-over-period price increases after a recession is completely normal,” Soper said. “And it’s no bubble.”
There were stronger-than-average price gains in some local markets in the third quarter, according to the Royal LePage report. For example, the average price of bungalows was up 14 per cent in St. John’s, 9.2 per cent in Winnipeg, 9.1 per cent in Montreal and 8.8 per cent in Vancouver.
Vancouver was easily the most expensive housing market in the country, with an average bungalow price of $873,500.
There were few examples of price declines in the 16 local markets covered by Royal LePage. There was, however, a 4.4 per cent drop in the price of bungalows in Moncton, N.B., a one per cent decline for two-storey homes in Calgary, and Calgary, Edmonton and Regina all saw condo prices dip.
Soper said it’s likely this year’s fourth quarter will see Canadian home prices, on average, about even with year-earlier levels, given the high comparison levels. He expects a return to a range of three to five per cent growth early in the new year.
The Royal LePage report is the latest showing the Canadian housing market in stable territory. CREA recently reported home sales rising in September for the second straight month. Prices of homes sold through the Multiple Listing Service (MLS) were flat with a year earlier and ahead 1.9 per cent from August.
As well, Statistics Canada recently said new-home prices in August were up 0.1 per cent, even as most economists expected a decline by as much.
Craig Fehr, a St. Louis-based analyst of Canadian financial services for Edward Jones, is among those who raised the spectre of a housing bubble in Canada earlier this year.
On Tuesday, he said the risk associated with Canada’s residential real estate market has lessened due to some slowing of price growth and tighter lending conditions.
“Housing data has been a little more solid than we expected, which is a good thing, (but) we would continue our position that we would expect things to remain relatively tepid in the housing market as the recovery takes shape, because by no stretch are we back to the economy firing on all cylinders,” said Fehr.
Despite the positive trends of the Canadian housing market, Fehr warned against looking to housing as a primary, long-term investment strategy, instead recommending diversification.
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