The average price of a two-storey home in Canada was 4 per cent higher than a year ago in the third-quarter, at $403,747, while condos saw prices rise 1.8 per cent to $243,607, according to Royal LePage’s house price survey.
But sales are slowing and prices are likely to follow suit, Royal LePage CEO Phil Soper suggested, while adding that because of low interest rates the downward pressure on prices should be “minimal.”
“A drop in the number of homes trading hands typically precedes a period of softening house prices,” he said in a press release. “During the third quarter, unit home sales were positive in July, fell 9 per cent year-over-year in August and we are expecting September to show a decline as well.”
He added that the changes that Finance Minister Jim Flaherty made to the mortgage insurance rules effective July 9, including cutting the maximum length of insured mortgages to 25 years from 30 years, have accelerated the correction.
First-time buyers have been impacted the most. “They may remain renters for some time as they save; some will opt for less desirable neighbourhoods and some will purchase smaller homes,” Mr. Soper said. “In the meanwhile, we will feel their absence in national sales statistics.”
Behind the national averages there were wide disparities in how different regions of the country are faring. Vancouver saw price declines in the third quarter (1.5 per cent for two-storey homes and 3 per cent for condos), while St. John’s saw large increases (8.2 per cent and 9.2 per cent).
Royal LePage is hoping that September’s increase in consumer confidence will lend a hand to sales this fall.
Meanwhile, sales of existing homes in the Greater Toronto Area were down 21 per cent from a year ago in September, while prices were up 8.5 per cent, the Toronto Real Estate Board said in a separate report.
Stricter mortgage insurance rules have dented sales, but the board also emphasized that there were fewer working days this September than last September and suggested that adjusting for that factor the decline in sales would have been smaller.
Sales of detached homes in the downtown Toronto area covered by the 416 area code fell 27 per cent from a year earlier, while prices were up 10 per cent. Sales of condos in the same area were down 29 per cent, while prices were up 8 per cent.
The board’s data is based on transactions over the MLS system, and therefore captures mostly resales of existing properties as opposed to sales of newly-built condos or houses.
Across all housing types, the average selling price was $503,662, up more than 8.5 per cent.
Toronto Real Estate Board manager of market analysis Jason Mercer is expecting prices to continue to rise through 2013, driven by low-rise homes, unless there is a major change to the economic outlook.
The average resale price of a detached home in downtown Toronto is now up to $781,826, while the average resale condo cost $377,422 in September.