Canada's Housing Market Remains Strong as 2006 Closes, House Prices Forecast to Increase by 6.5% in 2007 - Commodity-rich Western provinces continue to report highest rise in average house prices

Dec 14, 2006 - Canada's resale housing market will finish the year on strong and stable footing as average house prices increased, year-over-year, in almost all markets examined. This healthy activity is expected to continue into 2007. Throughout 2006, regional variances were evident, with substantial double-digit gains reported in the West, while Ontario, Quebec and Atlantic Canada reported more modest gains, according to a year-end report released today by Royal LePage Real Estate Services.

Of the 83 markets examined across the country, the average price of a standard condominium experienced the greatest appreciation rising by 16.8 per cent to $218,015, followed by a detached bungalow, which increased by 16.2 percent to $304,271, and a standard two-storey property, which rose by 13.4 per cent to $366,839, year-over-year.

Canada's healthy and stable fourth quarter real estate market is bolstered by the combination of solid economic fundamentals including low unemployment rates across the country, higher incomes, and strong consumer confidence. Moderate interest rates have also led to an increase in market activity over the past several months, as new buyers continued to enter the real estate market.

“Canadians' passion for real estate remained steadfast throughout the year with home ownership reaching record levels during 2006. However, the frenzied nationwide sellers' market that characterized the first half of this decade finally began to moderate to more normal levels. House prices still rose across Canada, but at a measured pace, and the number of homes available for sale rose to the more comfortable levels indicative of a healthy, balanced market,” said Phil Soper, president and chief executive, Royal LePage Real Estate Services. “Looking ahead to 2007, our plucky housing market should soldier on, with prices rising comfortably, as key economic fundamentals underpin positive consumer confidence.”

In 2007, Canada's housing market is poised for continued, yet moderate growth with average house prices forecast to rise by 6.5 per cent to $293,000, according to the 2007 Royal LePage Market Survey Forecast. The number of property transactions is expected to decrease by 3.0 percent to 468,000 units sold.
It is expected that home prices will appreciate in the mid-single digits across much of Canada during 2007. The commodity-based Western provinces will see higher levels of activity than in the rest of the country, as limited inventory and high demand continues to characterize the market. However, the rate of price appreciation in the West will temper dramatically from the unsustainable increases seen during 2006.

“The huge leap in Alberta house prices during 2006, and particularly those experienced in Calgary, was simply unsustainable for any extended length of time,” said Phil Soper. “In a single year, Calgarians moved from enjoying some of the most affordable housing in metropolitan Canada, to membership in the 'most costly' club, previously the exclusive domain of Toronto and Vancouver. Those stratospheric price increases should return to earth in 2007.”

Consistent with the past three quarters of 2006, the fourth quarter recorded the highest average price appreciations in all housing types surveyed, in Calgary and Edmonton. High in-migration due to employment opportunities in the oil and gas industry and related support sectors resulted in seller's market conditions in Alberta. Winnipeg reported strong double-digit average price appreciation during the fourth quarter due to unseasonably warm fall weather and tight inventory. In British Columbia, strong consumer confidence, affordable interest rates, and favourable economic conditions fuelled home buying activity pressuring average house prices to rise substantially.

In Central and Atlantic Canada, balanced conditions characterized the fourth quarter market, with prices appreciating at a more modest pace.

In Toronto and Ottawa, prices increased at approximately the same pace, quarter-over-quarter. The upward pressure on house prices in Toronto eased slightly during the fourth quarter due to an increase in listings, and the frenzied conditions and frequent multiple offers which characterized the market during 2005 were no longer widespread. Ottawa's economy is one of the most stable in the country, and as a result, the city's housing market has not experienced the same peaks and valleys as experienced in many other major cities. Ottawa's market experienced a slight seasonal slowdown in buying activity during the fourth quarter; however, activity was balanced across all purchaser groups.

Montreal experienced modest growth and balanced conditions as a result of fewer purchasers in the market leading to greater inventory and longer listing periods. In Atlantic Canada, average property prices appreciated at a modest pace as a result of a recent flurry of new development and a steady flow of out-migration.

Source: www.royallepage.ca