Canada's Condominium Magazine

Home price growth to moderate in 2017, supply will remain key issue: Royal LePage

Home buyers in the Toronto area can take some slight comfort in the latest housing market forecasts from Royal LePage. If the realtor is right, home prices in the GTA will continue to rise throughout 2017, but not as steeply as last year. Royal LePage is calling for an aggregate price increase of 10 per cent in the GTA, putting that price at $793,000. In the fourth quarter of 2016, in contrast, the aggregate price rose by 16.1 per cent, to $720,761. Price gains were even greater when broken down by home type, the largest being 19.1 per cent year-over-year for a bungalow.

According to a Royal LePage spokesperson, factors driving the Toronto-area market are likely to remain unchanged in 2017. These include strong demand, low supply, and supportive economic conditions, all of which will “ratchet up” prices and intensify inventory shortages. Also, there has been increased interest in the area from speculators and potential homebuyers from outside the area who are looking for “stability and employment,” putting further demand on stretched inventory levels.

Those home-seekers looking for a bargain outside the city will likely be disappointed too. The strongest growth in the fourth quarter of 2016 came from outlying regions, not in the downtown core. In Scarborough, for example, the aggregate price of a home rose 15.9 per cent year over year, hitting $607,053. Richmond Hill, meanwhile, saw the second-highest price gains in the country, at 30.1 per cent. The aggregate price in the community north of Toronto rose to $1,138,826. Vaughn, Markham, Brampton, Mississauga, Milton, Oakville, Oshawa, Whitby and Pickering all experienced strong double-digit price appreciation.

Source: Royal LePage

Nationally, the price of a home in Canada increased 13 per cent year over year in the final quarter of 2016, reaching $558,153.

Price growth was by no means uniform across the country. In fact, says Royal LePage, the disparity in price appreciation from one region to another has never been greater than in 2016, with some areas experiencing double-digit growth while others saw negative growth.

While efforts to address deteriorating affordability in Ontario and B.C.’s largest metropolitan areas are well-intentioned, too many new taxes and regulations, by too many levels of government, introduced within such a short timeline and with perceivably little research and consultation, have caused confusion and triggered drops in consumer confidence, risking the long-term health of Canada’s housing market.

Housing price growth in Richmond Hill was 30.1 per cent in the fourth quarter of 2016, the second-highest in Canada.

The gaps between different regions will narrow in 2017, however, with a trend toward historical norms as “overheated” markets like Vancouver and Toronto cool down. Royal LePage is calling for a continuation of the price correction now underway in Vancouver, where eroding affordability has already become unsustainable, and moderating price growth in the GTA. Other regions, including Atlantic Canada, Alberta, and Quebec will see welcome upward price trends.

Royal LePage is critical of the “slew” of new policy initiatives introduced in 2016 at all levels of government. These included federal measures to tighten mortgage insurance rules, tax changes concerning capital gains, the 15 per cent foreign buyers tax in BC, and Ontario’s changes to the province’s land transfer tax rebate. These and other efforts may have been “well intentioned,” but their introduction with “little research and consultation” in such a short timeline only caused confusion and lowered consumer confidence, the realtor says. These unintended results pose a risk to the long-term health of the housing market, Royal LePage CEO Phil Soper said.

What our leaders should be doing, Soper commented, is addressing the “supply side of the equation,” putting an end to housing shortages.

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