Canada’s residential real estate market continued to grow in the third quarter of 2016, posting a double-digit year-over-year aggregate house price increase, according to the Royal LePage House Price Survey released Oct 13, 2016. The Government of British Columbia’s new 15 per cent property transfer surtax on foreign nationals and foreign-controlled corporations, introduced early in the quarter, has contributed to slower sales activity but has had little impact to-date on Greater Vancouver home prices, which led the country in appreciation with year-over-year home prices increasing by 30.6 per cent in the quarter. While Ontario considers implementing a similar tax, over the same period house price increases in the Greater Toronto Area (GTA) also remained strong, increasing 13.6 per cent.
The Royal LePage National House Price Composite, compiled from proprietary property data in 53 of the nation’s largest real estate markets, showed that the price of a home in Canada increased 12.0 per cent year-over-year to $545,414 in the third quarter of 2016. The price of a two-storey home rose 13.7 per cent year-over-year to $649,635, and the price of a bungalow increased 11.0 per cent to $459,481. During the same period, the price of a condominium increased 5.8 per cent to $360,679.
“In what may be a final hurrah for this expansionary cycle, Greater Vancouver posted another quarter of unsustainably high price appreciation,” said Phil Soper, president and chief executive officer, Royal LePage. “Our widely followed house price composite showed that the median value of homes in the tiny West Vancouver suburb increased by nearly forty per cent – or an astonishing million dollars – year-over-year. That said, relief appears to be on the way. For months, the number of homes trading hands has been slowing on eroding affordability. And, slower sales volumes lead to moderating prices.”
“Nationally, our real estate markets remain healthy, with home values showing modest to strong (yet rational) price appreciation in almost every Canadian city,” Soper continued. “Even in the hardest hit oil patch regions, prices have held up well, with small single-digit declines, year-over-year.”
On October 3, 2016, Federal Finance Minister Bill Morneau announced new measures specifically designed to cool the country’s housing market and curtail foreign buying activity. These measures are meant to bring consistency to mortgage insurance rules by standardizing eligibility for high- and low-ratio insured mortgages, expanding stress tests, and improving tax fairness by removing the ability of non-residents to claim capital gain exemptions, which are only applicable to properties identified as principal residences.
“Consumer confidence suffered a direct hit when the federal government introduced new, more restrictive regulations in early October,” said Soper. “While it is too early to say definitively, it appears Canadian homebuyers are adjusting quickly, and that fears of a hard correction were unwarranted. While the changes are significant, major lenders may already be using similar criteria when writing mortgages in sensitive regions like Alberta and B.C., so the additional drag on the market resulting from the new legislation won’t be as great as it appears on the surface.”