September 23, 2020

Canadian Property Prices Rise By Almost 5Pc As Market Rebounds

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The average sale price of a Canadian property has risen by just under 5% year-on-year and sales are up on a monthly basis, according to data from the country’s Canadian Real Estate Association (CREA).

The actual (not seasonally adjusted) figures for home sales in June 2013 showed an average sale price of $386,585, an increase of 4.8% from June of 2012.  Single-storey family homes were up by 3.1% year-on-year in June 2013, town house and terraced properties rose by 1.6% and apartment units saw an increase of 0.4%.

The seasonally adjusted annualized rate of housing starts in June 2013 was 199,586, according to data from the Canadian government’s housing agency, while analysts polled by Reuters had expected to see 187,000 starts over the same period.  May’s numbers were also revised up, with the Canadian Mortgage and Housing Corp putting the new figure at 204,616 starts.

June’s price increase was the fourth consecutive monthly rise, with activity now running 11% above where it stood in February.  Home sales improved in two thirds of all local markets in June, including almost all of Canada’s large metropolitan areas.  The greatest gains were reported in Victoria, Greater Vancouver, the Fraser Valley, Edmonton, Saskatoon, Winnipeg and Montreal.

CREA President Laura Leyser commented: ‘For the second month in a row, sales improved in the majority of local markets.  Whether those gains reflect temporary factors or a fundamental improvement after a slow start to the year really depends on where you are.’

Increases in mortgage interest rates probably prompted some buyers who have pre-approved mortgages to step into the market in June, particularly in the large urban areas where affordability is strained.

‘We have seen this happen before.  If fixed mortgage rates continue holding where they are or edge slightly higher, sales may ebb over the summer and early autumn, with slightly higher borrowing costs picking up where the finance minister left off last year to keep the housing market in check,’ explained Gregory Klump, CREA’s Chief Economist.

Mr. Klump refers to adjustments made by the Canadian government last year to the rules governing the country’s housing market, intended, in the words of Minister of Finance Jim Flaherty, to help ‘hard-working Canadian families to save by investing in their homes and their future’ – by ‘measures we have introduced to keep the market strong, and help to ensure households do not become overextended.’  Rules such as reduced amortization periods and reduced refinancing percentages met with some controversy at the time, as did the Canadian government’s system of mortgage guarantees.

Now, however, demand has made itself strongly felt in key Canadian markets, helped by borrowing costs that remain near historic lows.

‘Canada’s housing market continued to defy the skeptics in June,’ BMO Capital Markets Economist Robert Kavcic said in a note to clients.  Mr. Kavcic pointed to the detail, too – ‘sales finding a floor in recent months, prices well behaved and homebuilding close to demographic demand.’

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