What’s driving Canada’s housing price strength?

In Q3 2015, home prices increased in most markets in Canada, says a Royal LePage House Price Survey.

The effects of the crude oil shock are still filtering through the economy, it notes, but non-energy sectors are regaining momentum—that’s partially due to the lower Canadian dollar stimulating higher exports, particularly those to the U.S.

As such, consumer confidence is rising, which is a boon for Canada’s real estate markets: the average price of a home in Canada increased 8% year-over-year to $502,643 in Q3 2015, says the survey.

More specifically, the price of a two-storey home rose 9.9% year-over-year to $615,304, while the price of a bungalow increased 6.8% to $421,757. During the same period, the price of a condo increased 2.7% to $338,945.

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“Economic slowdowns in energy-dependent markets have, in part, been offset by renewed industrial activity in other parts of the country, and by the Bank of Canada’s recent interest rate cuts,” says Phil Soper, chief executive officer of Royal LePage.

“In line with recent quarters,” he adds, “strong national home price increases are largely being driven by continued double-digit percentage increases in the Greater Toronto Area and Greater Vancouver, where housing affordability is already becoming a growing challenge for many individuals and families.”

In particular, “2015 has been positive for Ontario, resulting in strong consumer confidence and increased housing market activity. The strength of the U.S. economy, coupled with a lower Canadian dollar, has greatly increased sales in Ontario’s manufacturing and services export industries.”

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Statistics breakdown

In Q3, Greater Toronto Area home prices saw an aggregate year-over-year increase of 11.3% across all housing types surveyed, to a price of $612,261. The price of a home in the City of Toronto climbed 11.2% to $639,970.

In a few cases, house prices in Toronto’s suburbs are outpacing those in central parts of the city, says the survey. During the quarter, the median price of a standard two-storey home in Richmond Hill and Vaughan increased 18.6% year-over-year to $963,561 and 18% to $842,173, respectively, while the price in Toronto rose 17.1% to $961,656.

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“Homes in legacy, central Toronto neighbourhoods [are] moving increasingly out of reach, [so] we’re observing that more affordable areas in Southern Ontario are experiencing substantial price appreciation and heightened sales activity levels,” says Soper.

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Over the same period, British Columbia’s lower mainland region recorded exceptional house price increases: the price of a home in Greater Vancouver rose 12.9% year-over-year to $928,532. And, as with Toronto, house price increases in some surrounding areas outpaced those in the city core.

A notable difference is that these prices are now in excess of $1,000,000, with T=the median price of two-storey homes in Richmond and Burnaby seeing year-over-year increases of 23.5% to $1,200,462, and 20.9% to 1,184,385, respectively. Meanwhile, the price of a two-storey home in the City of Vancouver increased 17.3% to $1,925,491, and the median price of a standard two-storey home in north and west Vancouver increased to $1,267,113 and $2,775,782, respectively.

“Economic growth in British Columbia, in conjunction with migration into the province, continues to drive local housing activity,” says Soper. “We expect this to continue through the balance of 2015.”

But, “Vancouver job growth has not kept up with the leading regions of the country, which is at odds with the level at which its housing market is appreciating. This disconnect lends some credibility to the argument that housing in this market is being influenced by international buyer activity.”

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The survey also includes the following highlights.

• Looking to Saskatchewan and Newfoundland, home price increases in Regina and St. John’s are now firmly below the national average.
• In Alberta, Calgary and Edmonton’s housing markets continue to hold firm despite continued economic uncertainty.
• Regions in Atlantic Canada are showing mixed results, but Halifax shows healthy year-over-year price increases.
• Price balance appears to be returning to major Quebec housing markets, as the lower Canadian dollar supports the province’s manufacturing and export sectors.

Considering the strength of Canada’s real estate market, says Soper, it’s not surprising that, as we enter the final days of the federal election, “all of the major political parties are acknowledging the housing sector’s prominence.”