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Big city prices are skewing housing data across Canada according to research released Wednesday by Royal LePage.
While prices increased 5.2 percent nationwide to an average of $406,454, the highest ever year-over-year gain, a closer look reveals those numbers were largely driven by urban centres, specifically Toronto and Vancouver.
“If you pull Toronto and Vancouver out of the numbers you see a full two percentage point drop in the average home price in Canada,” said Phil Soper, president and CEO of Royal LePage in an interview with BNN.
He says urbanization and supply shortages are driving scorching hot markets in those regions and “masking otherwise moderate price appreciation nationally.”
Regions just outside of the Greater Toronto Area speak to his point. London, Ont. saw a year-over-year increase of 2.2 and 2 percent for detached bungalows and standard two-story houses respectively. Royal LePage is projecting a 7.1-percent increase in Vancouver by contrast for the end of 2014.
Soper also blames media organizations centred in metropolitan markets for inflaming the public’s hysteria.
“If you look at the Toronto numbers and certainly headlines about real estate, you’d think that the market as a whole is on fire or in bubble territory,” said Soper, who worries that such headlines are encouraging intervention from Ottawa through mortgage insurance policy.
He also sides with a new report from TD Economics suggesting that condo prices, even in the Toronto and Vancouver markets, are becoming more affordable.
“At this stage I would say we are out of the woods in the medium term. There was concern in 2012. We echoed that in our releases at that time. Considerably more inventory was coming online in Toronto and Vancouver than the long term need, but it appears to have been absorbed well. The rate of building seems to have trailed off and we are into more balanced territory now,” said Soper.
Royal LePage sees an improving picture for home values as well, bumping their annual outlook up to five percent from 3.5.
“Even our aggressive outlook wasn’t enough, but in the following year that should trail off. We should move into the mean, where the larger cities fall closer to the appreciation of wages and salaries, and smaller centres are pulled up by general economic strength.