“For our 2015 forecast, we could not ignore the potential impact of the steep decline in the price of oil on housing markets across Canada,” said Phil Soper, president and chief executive of Royal LePage.
“In the immediate term, we anticipate that the natural slowing of home price appreciation we called for in the third quarter of 2014 will be delayed in Central Canada and accelerated in the West by recent developments in the energy sector.”
For the first half of 2015, Royal LePage expects a confluence of factors and the lower cost of oil to support continued positive price momentum in the Greater Toronto Area (GTA), which should experience the highest major market price increases.
Ontario’s strengthened export economy buttressed by a flourishing U.S. economy and lower Canadian dollar, improved labour market trends, and unsatisfied demand from countless homebuyers who lost out in 2014 GTA bidding wars, are expected to carry the 2015 spring market.
Meanwhile, in Atlantic Canada, buyers should continue to have the upper hand, with home prices across the region forecast to rise below general inflation.
The House Price Survey and Market Survey Forecast, published today, also found that average home prices across the country showed modest to healthy year-over-year gains in the fourth quarter of 2014, with the average home price increasing between 4.5 per cent and 6.7 per cent year-over-year.
Nationally, the average price of detached bungalows rose 6.7 per cent to $406,218, while standard two-storey homes increased 6.0 per cent to $443,379, and standard condominiums saw a 4.5 per cent increase to $257,624.
“In the fourth quarter of 2014, real estate markets unfolded as we anticipated, with modest year-over-year price changes in most regions contrasted against continued steep price increases in Western Canada and Greater Toronto,” added Soper.
“This follows a similar trend observed in the third quarter of 2014, when we predicted the beginning of a cyclical slowing in home price appreciation, to a pace that better reflects broad economic factors.”
The report also noted that potential threats to the health of the Canadian housing market remain, including sharp increases in interest rates, further federal government intervention in the mortgage market or a serious stumble on America’s road to full economic recovery, but these are all considered unlikely in 2015.
“Ultimately the biggest threat to the Canadian housing market is a decline in consumer confidence, which could result from worsened employment prospects or decreased purchasing power, be it real or perceived,” said Soper.
“In this light, we will be watching market developments closely in the regions most negatively impacted by oil price declines, such as Alberta, Saskatchewan and Newfoundland.”
Despite warnings of an overvalued housing market and plunging oil prices, a new report suggests that home prices across Canada will increase by 2.9 per cent in the year ahead.