Royal Lepage recently released their Market Survey Forecast and House Price Survey which found that it Canada’s resale housing market had recovered lost ground in Q2 2009 and is well positioned to stabilize for the remainder of the year, after a very slow start.

As the economy begins to stabilize and consumer confidence improves, house prices are expected to appreciate slightly in much of eastern and central Canada. Greater than national average price declines are predicted for the western cities that saw the greatest price inflation earlier in the decade, including Edmonton, Calgary and Vancouver.

“Given the grim shape that Canada’s real estate market was in this past winter, the turnaround we have witnessed in the second quarter is really quite remarkable. We believe this improvement represents a sustainable change across the country. While seasonally weaker conditions are to be expected in the fall, the plucky Canadian real estate market is stabilizing and a healthy level of activity is forecast for the second half of 2009,” said Phil Soper, president and chief executive officer, Royal LePage Real Estate Services.

During the second quarter, average house prices across most Canadian markets began to appreciate, recovering from the lows experienced during the winter months. Average national prices remain slightly behind those posted during the same period in 2008. Of the housing types surveyed, the price of detached bungalows declined to $327,964 (-3.5 per cent), two storey property prices decreased to $392,378 (-3.7 per cent), and standard condominiums price points fell slightly to $236,612 (-4.0 per cent), year-over-year.

Soper observed, “With our industry’s busiest quarter behind us, we feel comfortable revising our 2009 forecast to the positive. When the anticipated market decline struck last winter, it was with greater speed and intensity than predicted, but the strength of the rebound was equally surprising. If general economic conditions continue to improve, as we expect they will, 2009 will be characterized as a period of moderate housing market correction after several years of above-average price growth.”

The 2009 national average house price is forecast to decline marginally by 2.0 percent, to $297,500 by end of year and unit sales are projected to fall slightly by 1.0 percent to 430,000.

“Improved affordability, driven by flat or lower home prices and inexpensive mortgage financing, has been the principle catalyst in this recovery. Pent up demand is also a factor in the lift we see in the second quarter numbers. For six months straddling the year’s beginning, buyers stayed away from the market in an understandable, emotional reaction to very unsettled global economic conditions. Canadians appear to be stepping beyond these fears and are once again moving onto and up the home ownership ladder,” stated Soper.

In early 2009, the precipitous drop in unit sales remains the most dramatic indicator of the recession’s impact on Canada’s real estate market. With spring, consumers appeared ready to believe the worst was behind them and returned to the market in force, driving increased activity across each housing type. Couple this with historically low interest rates and leveling unemployment, Canada’s residential real estate market got back on track during the quarter.

Undergoing an inevitable cyclical correction, price adjustments can be seen with marked variances across Canada’s provinces. As expected, British Columbia and Alberta posted the most significant price modifications, as home values in those markets retreated in the wake of several mid-decade years of unsustainable price inflation, and have now evolved to a more balanced state. Prices appear to have stabilized and it is expected that these regions will continue to see improvements into 2010. In particular, the impact of lower home prices has improved affordability to the point that people are buying homes again on the West Coast, where sales activity has increased substantially.

Alternatively in Atlantic Canada, homes continue to appreciate due to strong local economies, which have helped to shelter the region somewhat from the turbulence witnessed in other provinces. As well, the region’s generally moderate home prices have helped keep demand strong. Newfoundland, in particular, stands out as a region that continues to see significant home price appreciation, as supply cannot keep up with the demand driven by vibrant and growing industries such as those in the province’s oil and gas sector.

Meanwhile, home prices in Toronto declined slightly in the second quarter, reflecting the national average trend. In the early spring, it was first-time buyers who triggered the increased activity levels, now those looking to move up are also active in the market. Similar to the situation in other large cities in central Canada, the most desirable neighbourhoods experienced supply shortages, which put upward pressure on prices.

“Looking ahead to the second half of 2009, year-over-year price comparisons will likely appear increasingly more favourable. It is important to remember that the baseline for the latter half of 2008 was unusually low, particularly in the fourth quarter when the full impact of the global financial crisis was felt. Our expectation is that most Canadian regions will experience stable housing prices through into the spring of 2010,” concluded Soper.

Regional Market Summaries

Halifax

In Halifax, a stable economy has contributed to a healthy real estate market where average house prices increased modestly despite a slight dip in sales activity. The market is beginning to pick up following a slow first quarter. Pent up demand will see a return to a more active market in the last half of the 2009 with the anticipation of a slight boost in sales activity and average house prices growing at a leisurely pace.

Montreal

The housing market in Montreal experienced a solid second quarter, with average house prices for most property types expected to increase for the remainder of 2009. Higher inventory levels resulted in balanced market conditions seeing the number of new listings equal to the number of sales. Low interest and unemployment rates will help maintain the strength of the real estate market through to the end of the year.

Ottawa

Ottawa continues to remain a steady market for residential real estate, with sales activity in the second quarter coming out strong from a slow first quarter. Ranked number two among Canada’s large cities for affordable real estate and coupled with low interest rates, all types of buyers were drawn to the market. House prices are expected to remain stable throughout the remainder of year with numbers slightly higher than anticipated.

Toronto

In Toronto, the real estate market witnessed significant second quarter gains. The return of consumer confidence and an upswing in spring market activity brought house prices and unit sales down as buyers emerged to take advantage of affordable properties and low lending rates.
As the market begins its transition from a buyer’s market to a balanced market, with indications of a seller’s market arising, it’s anticipated that the market will stabilize by the end of year.

Winnipeg

Winnipeg’s real estate market has remained relatively resilient in the second quarter with average house prices in key housing segments increasing from the first quarter of 2009. Real estate in Winnipeg is modestly priced when compared to other cities in Canada, creating ideal conditions for buyers in the province. Looking ahead, average house prices are anticipated to stabilize for the remainder of the year.

Regina

Regina’s real estate market started on the road to recovery in the second quarter of 2009 and is expected to further improve through the remainder of the year. An increase in unit sales helped diminish the city’s high inventory levels as buyers are beginning to initiate deals. Recovering manufacturing and resource sectors, new construction activity in Regina, and low interest rates have also helped to improve buyer confidence.

Calgary

With the economic downturn and the oil and gas industry struggling, the housing market in Calgary has been on the decline since 2008, after many years of price inflation at the beginning of the decade. Quarter one of 2009 revealed some signs of price increases and stabilization in certain areas in Calgary, but the second quarter reveals fluctuations in the market. These price fluctuations are occurring across Calgary in all housing types with the market forecast predicting price reductions for the remainder of 2009.

Edmonton

Housing market conditions in Edmonton were characterized by lower inventory levels and moderate house price increases. Buyer demand was strong during the second quarter as most buyers felt a sense of urgency to capitalize on the recent market conditions. This has led to a slight tightening in Edmonton’s housing market with appreciation in average house prices expected for the last half of 2009.

Vancouver

Vancouver’s real estate market stabilized in the second quarter of 2009 following a price correction that started last fall moving towards a balance between supply and demand. Properties priced at, or below, market value are generating multiple offers from buyers. Average house prices throughout the last half of the year are expected to inch upwards, but increases will likely be in the low single digits.

Canadian Annual House Price Changes

Royal LePage’s Q2 2009 House Price Survey shows the following annual change of prices for key housing segments in select national markets:

 

Detached Bungalows

Standard 2 Storey

Standard Condominium

Market

Q2 2009 Average

Last Quarter Average

Q2 2008 Average

Bungalow % Change

Q2 2009 Average

Last Quarter Average

Q2 2008 Average

2 Storey % Change

Q2 2009 Average

Last Quarter Average

Q2 2008 Average

Condo % Change

Halifax

235,333

215,667

233,000

1.00%

277,333

262,333

275,000

0.80%

164,000

162,000

154,500

6.10%

Charlottetown

160,000

157,000

156,000

2.60%

190,000

188,000

185,000

2.70%

120,000

120,000

120,000

0.00%

Moncton

158,000

156,000

164,000

-3.70%

134,200

134,500

132,000

1.70%

n/a

n/a

n/a

n/a

Fredericton

172,000

167,000

162,000

6.20%

210,000

210,000

197,000

6.60%

140,000

137,000

126,000

11.10%

Saint John

187,681

201,476

202,364

-7.30%

240,889

268,000

285,179

-15.50%

126,000

181,387

119,191

5.70%

St. John’s

200,000

193,000

181,000

10.50%

276,000

267,000

249,333

10.70%

215,333

205,667

193,333

11.40%

Atlantic

198,368

190,748

192,636

3.00%

198,368

190,748

192,636

3.00%

174,623

172,423

156,774

11.40%

Montreal

236,148

232,375

234,352

0.80%

337,872

330,056

336,443

0.40%

209,311

206,528

204,942

2.10%

Ottawa

325,417

317,500

316,167

2.90%

325,417

318,500

315,750

3.10%

212,750

207,833

203,667

4.50%

Toronto

416,179

405,286

434,282

-4.20%

544,785

516,052

562,478

-3.10%

296,039

289,397

311,026

-4.80%

Winnipeg

237,750

231,663

233,800

1.70%

262,914

251,721

257,800

2.00%

143,700

145,943

144,614

-0.60%

Regina

272,900

266,625

278,850

-2.10%

245,000

245,000

254,000

-3.50%

180,375

168,806

190,000

-5.10%

Saskatoon

312,250

312,500

340,375

-8.30%

337,250

348,500

388,000

-13.10%

202,500

187,000

236,000

-14.20%

Calgary

401,600

391,833

438,122

-8.30%

400,167

390,689

437,744

-8.60%

252,344

245,756

285,033

-11.50%

Edmonton

302,143

297,857

320,000

-5.60%

328,571

322,979

348,571

-5.70%

203,833

199,167

226,000

-9.80%

Vancouver

760,000

743,750

839,500

-9.50%

846,000

828,750

943,000

-10.30%

424,000

406,500

450,750

-5.90%

Victoria

466,000

453,000

450,000

3.60%

446,000

435,000

470,000

-5.10%

275,000

260,000

295,000

-6.80%

National

327,964

319,865

339,879

-3.50%

392,378

379,708

407,374

-3.70%

236,612

231,526

246,490

-4.00%

Canadian Housing Trends

2009 Royal LePage Market Survey Forecast

City

Prov

2008/2009 Change

2009 Mid-Year Forecast

2009
YTD

2009
Forecast

2008

2007

Halifax

NS

4.20%

241,800

240,451

234,300

232,106

216,339

Montreal

QC

2.10%

263,500

260,312

254,400

258,041

248,949

Ottawa

ON

2.60%

298,000

297,330

291,000

290,483

273,058

Toronto

ON

-1.50%

374,400

377,091

364,800

379,943

377,029

Winnipeg

MB

3.50%

203,900

205,380

204,900

196,940

174,202

Regina

SA

10.60%

254,000

245,228

243,300

229,716

165,613

Calgary

AB

-4.80%

386,000

373,835

402,000

405,267

414,066

Edmonton

AB

-4.60%

317,500

315,831

333,000

332,852

338,636

Vancouver

BC

-5.70%

560,000

558,893

540,100

593,767

570,795

CANADA*

 

-2.00%

297,500

300,777

295,000

303,594

305,822

* Represents all homes in Canada
Source: Royal LePage Real Estate Services.The Canadian Real Estate Association and local real estate boards