Low rates and high temperatures conspired to increase home prices in the first quarter of 2012, according to the latest numbers from one of the country’s largest real estate organizations.
The Royal LePage House Price Survey showed the average price of a home in Canada increased between 2.2 and five per cent in the first quarter of 2012, compared to the previous year.
In the first quarter, standard two-storey homes rose five per cent year-over-year to $398,282, while detached bungalows increased 4.4 per cent to $356,306. Average prices for standard condominiums increased 2.2 per cent to $243,153.
Market activity in the first quarter of 2012 was unusually high resulting in tight inventories and strong price appreciation in most major cities said the survey. Buyers were attracted into the market by historically low mortgage rates and sellers brought listing inventory to market earlier than normal, encouraged by unseasonably warm weather.
“Our housing market is being pulled in opposite directions by opposing economic forces,” said Phil Soper, president and chief executive of Royal LePage Real Estate Services. “On one hand, there is the rapidly strengthening U.S. economy, increasing Canadian consumer confidence and what can only be called a national mortgage sale encouraging activity and bidding up home prices. On the other, we have signs of over-shooting values and strained affordability in our largest cities. We are likely to see much more modest price appreciation as the year unfolds.”
Soper commented that the effect of low mortgage rates, which fell below three per cent for a five-year fixed-mortgage, is more pronounced in cities that are affordable such as Winnipeg, Ottawa and St. John's.
“In Vancouver, the average price of a standard two-storey home is now $1,182,250,” he said. “Although the city posted strong year-over-year price gains in the first quarter, we expect to see Vancouver’s housing market to reach a level of price resistance. Although desirability is high, many potential buyers have simply been pushed out of the market and cannot take advantage of low mortgage rates, which will ease demand and should bring price relief.”
In comparison, Soper commented that he did not expect price resistance to affect Toronto’s housing market where a standard two-storey home would sell for $645,467.
Another notable exception was Calgary whose flat year-over-year house price appreciation masked a very active housing market that witnessed double digit growth in unit sales compared to the same period in 2011.