The real estate market is at a tipping point, with some areas becoming too expensive for buyers, according to the head of one of the country's largest Realtor networks.
Royal LePage’s second quarter House Price Survey and Market Survey Forecast says by the end of the year, national average prices will be 3.2 percent higher compared with 2011. Prices increased between 3.3 per cent and 5.5 per cent in the second quarter of 2012.
“We have had three years of solid house price appreciation in almost all regions of the country,” says Phil Soper, president and CEO of Royal LePage Real Estate Services. “Confidence in Canada’s real estate market is sound, but home prices cannot grow faster than salaries and the underlying economy indefinitely. Some regions have reached or perhaps even exceeded the current upper level of price resistance as buyers have embraced an era of historically low mortgage rates.”
In the second quarter, standard two-storey homes rose 4.7 per cent year-over-year to $408,423, while detached bungalows increased 5.5 per cent to $376,311. Average prices for standard condominiums increased 3.3 per cent to $245,825.
Soper noted that when national average home values do soften, they historically have declined for only a brief period of time. Following a period of significant price appreciation, Canadian real property prices tend to flatten versus decline, until the economy catches-up to the new price norms.
Mortgage changes introduced last week will further dampen the market, especially for first-time buyers, Soper says. The effect will be more strongly felt in Vancouver where high house prices are already a “significant barrier”.
“The most recent set of mortgage changes, the fourth in four years, is also the most aggressive. The cumulative impact of these new regulations has created a significantly higher hurdle for young buyers seeking their first home and comes at a time when the market was slowing of its own accord. The timing of this intervention was unfortunate,” Soper noted.