Hot housing market seen cooling
Thursday, January 19, 2006 Page B3 - Globe and Mail
REAL ESTATE REPORTER
Sales of existing homes smashed records again in 2005, with average prices jumping 9.3 per cent and volumes in major markets hitting new highs for the seventh consecutive year.
Still, most observers in the industry believe the boom in markets for new and existing homes has passed its peak. This year is expected to bring a slower pace in most parts of the country as interest rates edge up and demand declines.
"We expect that 2005 was the high-water mark," said Gregory Klump, chief economist with the Canadian Real Estate Association. Mr. Klump predicts activity will taper off from record levels as higher interest rates and rising prices affect affordability. "Interest rate levels are the key factor," he said.
The strong economy in Western Canada set the pace in 2005 with average prices in the country's most expensive market, Vancouver, climbing a whopping 13.9 per cent to $425,745. (All figures are based on numbers collected through the Multiple Listing Service.) Oil patch prosperity in Calgary helped to push average prices up 12.6 per cent last year to $250,832. The city also had the greatest increase in the number of homes changing hands as volume shot up 19.1 per cent.
At the national level, average prices rose 9.3 per cent to $266,206 and sales increased 4.7 per cent to 336,071, both new highs. Last year marked the sixth consecutive annual increase in average home prices.
Mr. Klump said yesterday he expects volumes to decline this year by 5.4 per cent and price increases to moderate. In his most recent forecast he pegged prices to rise 5 per cent.
The one exception will be the West. Volume levels are expected to continue to climb in British Columbia and Alberta.
"It's going to be a strong year in Western Canada," agreed Elton Ash, regional executive vice-president of Re/Max of Western Canada. Mr. Ash said the Alberta market has started the year "with a bang," but he expects activity will plateau in late spring, partly because of a shortage of inventory.
While prices have risen sharply in Vancouver, Mr. Ash said those increases are supported by a strong economy and strong job growth. He does not believe they indicate bubble conditions.
Across the country, annual sales records were set last year in several cities including Vancouver, Calgary, Edmonton, Winnipeg, Toronto, Hamilton, Kitchener, Montreal, Quebec City, Saint John and St. John's.
The Schacter Team - Your Langley Real Estate Experts.