On Wednesday, Royal LePage Real Estate Brokerage released its House Price Survey and Market Survey Forecast, which revealed that home prices increased 9.2 per cent year-over-year in the second quarter of 2016.
“Economic and social disruptions have rocked the world once again, introducing new risks and making it very likely that the Bank of Canada will leave interest rates as-is for now,” said Phil Soper, president and CEO of Royal LePage. “Few industries are as rate sensitive as real estate. We don’t see even a mild correction for either the Toronto or pistol-hot Vancouver markets in 2016.”
Canada's residential real estate market posts its strongest year-growth in five years. Growth was led by Ontario, British Columbia, Manitoba and Quebec, which are the four provinces most tied to the finished goods and services export sector and the health of the U.S. economy. Alberta, Saskatchewan, New Brunswick and Newfoundland and Labrador continue to shoulder the weight of the downturn in the resource sector.
“Some have suggested that Britain’s exit from the E.U. will drive more foreign money into the relative safety of Canada’s real estate markets,” said Soper. “We anticipate the impact, if any, will be seen in the commercial property sector and not in housing markets. Beyond Europe, our research does point to increasing Vancouver and Toronto region foreign buyer activity in residential markets this quarter. Canada remains a favoured nation for the world’s real estate investors.”
Although the debate is ongoing as to exactly how much impact foreign investors have on certain housing markets across the country, one thing for certain is that the dynamics are unlikely to change anytime soon. The report does, however, suggest that the housing price increase in greater Vancouver has caused affordability to become a “major public policy issue” while calling the greater Toronto region that’s experienced second-highest housing price increase “healthy.”
“We see residential real estate as a long-term investment supporting family life. A home is ill-suited as a buy-and-flip investment. People that engage in this kind of activity are inevitably burned when a market slows and the time it takes to sell the property increases substantially,” Soper said. “We applaud the efforts of all levels of government to better understand Canada’s housing market, through a coordinated effort to gather and analyze real estate data. Still, we remain convinced that heavy-handed use of tax policy in an effort to artificially influence asset values in an open-market economy like ours is fraught with peril, particularly in a cyclical industry like housing.”
The real estate agency is predicting that during the second half of the year, the average home price will increase 12.4 per cent, compared to the second half of last year. Edmonton is the only city expected to experience a negative housing price change.
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