Fundamental conditions to support a strong housing market continue to remain in place, says Royal LePage
Canada’s median home price rose by an annualized 6.2% to $605,512 in the first three months of 2018 despite corrections in the Greater Toronto Area and Greater Vancouver, according to a recent survey by Royal LePage.
Demand dipped and prices softened as government measures have restricted access to mortgage financing and affordability eroded, the firm said. "We are experiencing a broad-based, residential housing correction in Canada, triggered by federal and provincial intervention," said Phil Soper, president and CEO, Royal LePage. "Strong house price gains in the first half of 2017 mask some of the recent market shifts when comparing year-over-year home value trends.”
When grouped by housing type, the median price of a two-storey home rose 5.7% year-over-year to $715,726, while the equivalent figure for a bungalow climbed 4.5% to $501,985. Condominiums saw the highest price appreciation rates, at 10.3% to reach $418,245, driven by significant year-over-year price gains in the country's largest housing markets.
New mortgage rules by the Office of the Superintendent of Financial Institutions (OSFI) took effect at the start of the year – including a financing stress test for borrowers with uninsured loans. Royal LePage saw national and regional sales activity levels fall at the outset of the quarter, as buyers may have solidified their purchases in 2017, before the rules took effect.
"The combination of declining affordability and government intervention has for the most part neutralized very high home price appreciation levels in the greater Vancouver and Toronto regions, relative to the extreme heights witnessed in recent periods," said Soper. "However, those looking for this slowdown to translate into material year-over-year home price drops shouldn't hold their breath. The demand for housing is so strong that the rate of home price appreciation is expected to pick up again in the second half of 2018."