Hot Toronto, cold Vancouver have competing effects on Canadian housing market
By Sunny Freeman
CANADIAN PRESS May 15, 2012
TORONTO – The Canadian housing market gained momentum in April as strong sales in the Toronto offset weakness in Vancouver, the Canadian Real Estate Association said Tuesday.
April seasonally adjusted home sales on CREA’s Multiple Listing Service gained 0.8 per cent compared with March.
On a year-over-year basis, the association said there were 49,480 homes sold in April, up 11.5 per cent from 44,370 a year ago, when sales slowed following a tightening of mortgage lending rules including the elimination of 35-year amortizations came into effect in March 2011.
Two of Canada’s largest markets are having opposite effects on the national average, with slowing sales and falling prices in Vancouver dragging, and soaring sales and prices in Toronto exerting upward pressure.
The average home price in Canada in April was up 0.9 per cent from a year ago at $375,810.
“It bears repeating that the national average price was skewed higher last spring by record level high-end home sales in Vancouver’s priciest neighbourhoods, and that a replay of this phenomenon was not expected this year,” said Gregory Klump, CREA’s chief economist.
The average selling price in Vancouver was down 9.8 per cent compared with a year ago at $735,315, while the average price in Toronto was up 8.4 per cent at $517,556. April sales in Vancouver slid 13.2 per cent while Toronto sales picked up 14.5 per cent compared to a year ago.
“Trends in Vancouver and Toronto continue to diverge. These two housing markets have an obvious influence on national statistics and a high profile, but Canada is a big place,” said Wayne Moen, CREA President.
Excluding Toronto and Vancouver, the average price in Canada was up 3.1 per cent from a year ago.
Gains in Montreal, Winnipeg, Edmonton, as well as London and St. Thomas, Ont., also contributed to the increased sales, offsetting declines in Ottawa, Windsor-Essex, Quebec City, the Fraser Valley, and Vancouver.
Continued strength in the housing market, largely due to the staying power of low interest rates, has led some economists to warn the market is overvalued. That could make homeowners vulnerable to a downturn, especially those who have used low interest rates to borrow more than they could otherwise afford.
TD Bank estimates Canadian home prices are 10 to 15 per cent overvalued, with the excess most evident in Toronto and Vancouver, said TD economist Diana Petramala.
“With mortgage rates still at rock bottom through the early part of this year and job creation heating up through March and April, it’s not that surprising to see continued growth in Canadian home sales,” she said.
“Still, growth in home prices and sales will likely be limited as the overvaluation has led to a deterioration in affordability. Overall, we anticipate the Canadian housing market to remain relatively flat in the coming year with home prices to rise just another two per cent this year, following gains of seven per cent in each of the last two years.”
The number of newly listed homes pared back 0.2 per cent from March to April, which, combined with slightly higher sales resulted in a tighter national housing market, but remains firmly entrenched in balanced market territory,” CREA said in a release.
A total of 157,804 homes have traded hands so far this year, up 6.4 per cent from levels reported in the first four months of 2011.
That’s also about four per cent higher than both the five- and 10-year averages for sales during the first third of the year.
Sales on CREA’s Multiple Listing Service was either up or held steady in half of all local markets, with Toronto and Calgary posting the biggest monthly increases for the second consecutive month.
Toronto home sales in 2012 have been particularly strong, up 9.5 per cent from year ago levels at 31,639 homes sold so far this year. But sales in Vancouver, a market that was bustling with high-end home purchases last year, are down 19.9 per cent so far this year at 9,935 homes sold.
“While these two cities are garnering most of the attention, Calgary is quietly becoming a market to watch,” said BMO economist Robert Kavcic, adding that sales in the city jumped 30 per cent year-over-year in April.
“If oil prices remain high enough to continue supporting strong economic growth and migration flows, Calgary could again become Canada’s real estate hot spot in short order.”
