The housing market is overheated in Vancouver, Victoria and Toronto, according to a new house price survey by Royal LePage, while other cities have seen more modest and sustainable growth.
"In Vancouver and Toronto, 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," said Phil Soper, president and chief executive of Royal LePage Real Estate Services. "Montreal is an example of a city where the market has been much more stable and homeowners there seem quite happy with the relatively slow pace of change."
The report identified three house price trends. The first was the roller coaster effect seen in Toronto, Vancouver and Victoria. Then there were the "non-stop growth" areas where housing markets were resilient during the economic downturn and saw steady price increases over a two-year period, including Halifax, Ottawa, Regina, Saint John, St. John's and Winnipeg. Lastly were the "level markets" where prices stayed relatively unchanged - Calgary, Edmonton, Moncton and Montreal.
Despite continued price and sales jumps in most cities, Soper said he expects calmer activity in the months to come.
"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," he 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."