Photo by Neal Sanche
The housing release for March by the Canadian Real Estate Association indicates that the Canadian housing market is transitioning into a more stable and sustainable state after more than two years of volatility.
The National Market
The Canadian market continues to be balanced, with the sales-to-new listings ratio growing to 0.57 in March from 0.54 in February, and the number of months’ supply remaining unchanged at 5.6. According to analysis at RBC, the average price of existing homes sold in Canada in the first quarter was up 7.2% from last year, but removing the Greater Vancouver Area from the equation, the year-over-year increase is about 2.6%. “It is a fact that home sales have picked up in the past year and that the market balance is a little tight, but both the level of activity and market tightness remain far from where they were in the years prior to the recession, when price gains were less spectacular (though still strong),” says the analysis.
Stable home prices, low interest rates, and improvements in employment have significantly encouraged the housing market in Calgary. The high number of single family homes sales (1,355 in March 2011) is driving the market recovery. The average residential price in the first quarter of 2011 was $398,558, increased by 1% from the first quarter of 2010. “Average single family home prices remain relatively stable compared to the first quarter of last year, as people continue to purchase more homes at the lower end of the price spectrum,” says Sano Stante, a director of the Calgary Real Estate Board . However, last month Calgary sales fell by 7.1% from March 2010.
RBC expects Canadian home resales to stay essentially flat on an annual basis, edging lower by 0.2% in 2011 and higher by 0.3% in 2012. Growing employment and household income gains will boost demand, but higher interest rates and a greater focus on deleveraging on the part of Canadian households will slow it down. The mortgage rule changes that took effect in March brought forward some sales that would have occurred later in the year. “Their overall impact on housing demand for the year will be marginally negative,” says the RBC forecast. They also predict prices will grow modestly, this year up by 0.5% and next year by 1.3%, as the market generally remains in balance.