“The soft landing is a Canadian phenomenon that has passed Toronto and Vancouver by,” Phil Soper, the president and CEO for Royal LePage and Brookfield Real Estate, tells REP. “Eventually, of course, the market will slow, but we’re probably talking about late 2016, at the earliest.”
Still, the end of next year is a long way off, and average price increases remain in the double-digits for those two cities, helping push up the national average in March.
In Toronto, the average price of a home rose 10.1 per cent last month to $613,933, compared to the year-ago period. Meanwhile, average prices were up 11.2 per cent in Vancouver to $891,652. Excluding those cities, the national average home price rose a modest 2.4 per cent to $332,711.
Soper says those cities have been able to maintain such extreme and seemingly unsustainable market conditions for several reasons.
“One, the economies in our two largest cities are quite vibrant right now,” he says. “They attract the majority of Canadian immigrants, and they have geographical and legislative restrictions on development that have created artificial shortages.”
In Toronto, for instance, Soper points to the Greenbelt and the lake as natural barriers to expansion, particularly in the single-family home sector. He also says the city’s close proximity to the U.S. has enabled it to benefit from that country’s economic growth and the low Canadian dollar – not to mention cheaper energy costs.
“So the natural and man-made obstacles and legislation have made a shortage of development land for single-family homes, and that’s why you’re seeing single family homes in Toronto buck the national trend toward lower pricing situations,” Soper adds.
Prices and sales in Canada’s two hottest markets all but rule out the possibility they’re on the verge of the soft landing gripping much of the country.