Regina tops in Canada
February 9, 2011 Regina Leader Post Staff and Financial Post
Regina saw the highest increase in house prices in Canada in the past decade, averaging nearly 10 per cent per year, according to a Re/Max housing report released Tuesday.
Regina also boasted the third-strongest sellers’ market in Canada during that time, with sellers calling the tune more than 60 per cent of the time, Re/Max said.
Across Canada, average price increases from 2000 to 2010 ranged from 4.8 per cent in London-St. Thomas to a high of 9.56 per cent in Regina. The national average was 6.8 per cent.
Gord Archibald, executive officer of the Association of Regina Realtors, said the Re/Max numbers look about right. “It’s probably not that far off the mark,’’ Archibald said.
Archibald noted that the average price on the multiple listing service (MLS) in Regina at the end of 2000 was $94,459. “We ended 2010 at $258,069. When you do the math, it works out to be a 273-per-cent increase.’’
Archibald added that most of the increase has taken place in the last four years.
“When you look at the pattern over that time, the real significant gains in price began in 2007.’’ For example, in 2006 “before the boom,’’ the average MLS price in Regina was $131,812.
“Then it jumped to $165,725 in 2007, then up to $229,000 in 2008, and it just continued on,’’ Archibald said.
“You can see that the majority of the gains were in the last four-year period.’’
He attributed the housing boom to growth in the strong local economy and population growth due to in-migration. “A very small increase in population — say 2,500 or 3,000 a year — has an exponential impact on the real estate market.”
He noted that prior to 2007, Regina averaged between 2,500 and 3,000 housing sales annually for decades, but after 2007 sales averaged between 3,300 (2008) to 3,900 (2007).
He also agreed with the Re/Max report that Regina has been a sellers’ market from most of the last decade. “That’s probably the case here in Regina. The majority of the last 10 years has been a sellers’ market.’’
By far the tightest market in the nation was Winnipeg, where sellers held sway for 85 per cent of the decade, followed by Hamilton-Burlington (67 per cent), Regina (63.6 per cent), Kitchener-Waterloo (59.8 per cent) and Edmonton (57.5 per cent).
However, the dramatic, decade-long runup in house prices reported will become a distant memory in the years ahead, analysts said Tuesday.
That pace of growth — seven per cent a year for 10 years — is unsustainable, says BMO Capital Markets economist Robert Kavcic.
“Over time, house prices tend to follow the rate of income growth, which is a little faster than inflation but certainly not seven per cent a year,” Kavcic said.
“Over that period we saw income growth on a per-capita basis of about half that rate. That's fine if you have offsetting factors like falling mortgage rates and longer amortization periods like we saw over the past 10 years.”
But looking ahead, Kavcic warned, the exact opposite is taking shape — mortgage rates are rising and amortization periods are shrinking.
In that environment, house prices will likely lag income growth, which Kavcic expects to average about 3.5 per cent a year.
Assuming inflation runs only at the Bank of Canada's target of two per cent a year and housing prices gain an optimistic three per cent, the net return to investors will be a scant one per cent a year, possibly less.
By comparison, in the decade gone by, prices in Edmonton posted a compound annual growth rate of 9.25 per cent a year for 10 years, the Re/Max report said.
The past decade was one of the healthiest periods on record for Canadian real estate, Re/Max said, but already the housing market is off the boil, slowing considerably over the past several months.