The Alberta housing slump picked up steam last month but new data from Toronto and Vancouver shows falling oil prices are having little impact on sales in Canada’s two most expensive cities.
The Toronto Real Estate Board said Wednesday the average price of a home sold in the Toronto area in January was $552,575, up 4.9% from a year ago.
Detached homes in Toronto proper moved closer to a $1 million average price. The average sale price in the category climbed to $948,713, up 7% from a year ago. Sales in the area also climbed 6.1% from a year ago.
Benjamin Tal, deputy chief economist with CIBC, doesn’t believe the impact of low oil will be felt by homeowners outside of Alberta. “It’s very difficult to imagine a scenario where Alberta will have a significant impact on the rest of the country,” he said, referring to prices.
He said the situation could create a policy problem for Ottawa as it copes with struggling and booming housing markets at the same time. “It’s not unthinkable to see bankruptcies in Alberta rising 25% to 30%,” said Mr. Tal, noting that type of percentage increase would be from a low base. “Then you have the net migration story. When oil prices go down people leave. When it goes up people enter.”
Realtors in Toronto are forecasting prices could grow even further in 2015, thanks to interest rates which have seen the prime lending rate drop to 2.85% while fixed-rate mortgages for five-year terms are under 2.5%.
“Lower borrowing costs will largely mitigate price growth this year, which means affordability will remain in check. The strongest rates of price growth will be experienced for low-rise home types, including singles, semis and town houses. However, robust end-user demand for condo apartments will result in above-inflation price growth in the highrise segment as well,” said Jason Mercer, director of market analysis, for TREB.
The resiliency of Toronto’s housing market has matched Vancouver’s strength where housing sales were up 8.7% last month from a year ago. Price climbed 5.5% during the same period.
Alberta home sales were hammered in January with Edmonton reporting a 26% decline from a year ago and Calgary off 39% during the same period. Prices in both cities have remained steady but new listings have surged, an event which could put downward pressure on prices as demand for housing slows amid shaken consumer confidence.
Toronto realtors remain unshaken by news in Alberta and were buoyed by the generally strong January results. “First, strong sales growth suggests home buyers continue to see housing as a quality long-term investment, despite the recent period of economic uncertainty. Second, the fact that new listings grew at a faster pace than sales suggests that it has become easier for some people to find a home that meets their needs,” said Paul Etherington, president of TREB.