Housing market at ‘tipping point’
TORONTO—The latest Royal LePage report on Canada’s home sales says prices generally went up in the second quarter and likely will rise further in some areas, such as Toronto and Winnipeg.
But it suggests Canada’s residential real-estate market appears to be at a tipping point, with some areas likely too expensive for buyers at the current levels.
The national average price for bungalows was $376,311, up from $356,625 in the same quarter of 2011 and $356,306 in the first quarter of 2012.
The national average price for two-storey detached homes was $408,423, up from $390,163 a year earlier and $398,282 in the first quarter of 2012.
And the national average price for condos was $245,825, up from $238,064 in the second quarter of 2011 and $243,153 in the first three months of this year.
Most of the major cities tracked by Royal LePage showed increases from the first quarter of 2012 and the second quarter of 2011.
There were a few exceptions scattered across the country, however, with some types of homes in some cities showing lower local average selling prices.
“Confidence in Canada’s real estate market is sound, but home prices cannot grow faster than salaries and the underlying economy indefinitely,” warned Phil Soper, the president and chief executive of Royal LePage Real Estate.
“Some regions have reached, or perhaps even exceeded, the current upper level of price resistance as buyers have embraced an era of historically-low mortgage rates,” he noted.
Soper said changes to mortgage rules introduced by Finance minister Jim Flaherty over the past four years will keep some people on the sidelines, particularly first-time buyers who account for up to half of the transactions.
Flaherty’s latest changes were announced last month and went into effect yesterday.
Borrowers refinancing their mortgages now are limited to 80 percent of the value of the home, down from 85 percent.
As well, the maximum amortization period dropped to 25 years from 30 for government-insured mortgages—giving borrowers less time to repay the debt in full.
Ottawa also tightened the standards lenders must apply before granting a mortgage.
Other changes by the Office of the Superintendent of Financial Institutions reduced the limit for home equity lines of credit to 65 percent of a property’s value, down from 80 percent.
“The cumulative impact of these new regulations has created a significantly higher hurdle for young buyers seeking their first home and comes at a time when the market was slowing of its own accord,” said Soper.
“The timing of this intervention was unfortunate,” he added.