Average house prices in Canada jumped 10.3% in the first quarter, with Vancouver leading the way, though the pace of growth is likely to moderate throughout the rest of the year, a survey from Royal LePage found.
Prices rose across all key housing types, with the average cost of a detached bungalow increasing 11% to $329,209 and standard two-storey homes rising 10.3% to $365,141. The price of a standard condo gained almost 11% to $228,963.
The strong recovery in the real estate market, fuelled by record low interest rates and tight supply, have led to fears of a property bubble. Royal LePage says talk of a countrywide boom fail to take into account significant regional variations.
The survey pointed out that geographically, the recovery in the housing market has been uneven, with some areas on a boom and bust roller coaster during the recession while other markets never stopped steady growth.
"House sale data from the past two year period shows tremendous variances in terms of how different cities reacted to the recession," Phil Soper, president and chief executive of Royal LePage said. "In Vancouver and Toronto, for instance, the dramatic unit sales fluctuations exhibit a significant degree of market irrationality: inordinately fearful when faced with poorer markets; and overly enthusiastic when the tables turned."
He said Montreal had proved much more stable and homeowners there are happy with the slower pace of change.
Expected rises in interest rates in coming months, coupled with more houses on the market, is likely to slow the market, the survey said.
"Even in our most frenzied pockets of market activity, the inevitable rise in interest rates coupled with home price appreciation will rein in demand as affordability erodes," Soper said. "Expect house prices to continue to rise, but the rate of appreciation should ebb steadily, month by month, throughout the remainder of the year, as balance returns to the industry."
Vancouver led the first quarter gains with a standard house rising 19.2% in value.