Still no ceiling on home prices - Toronto Star 01/12/06

What else is new? Another member of the Canadian Press that is predicting a slow down in the market. These people, as well as the CMHC economists, have been wrong for the last 3 or 4 years. I don't think it will slow down very much, if at all.

Jan. 12, 2006.
By TARA PERKINS
CANADIAN PRESS

Canadian housing prices remained strong in the fourth quarter of 2005 and should rise about six per cent this year on average, says a report by Royal LePage (TSX: RSF.UN).

But the number of homes sold will likely drop, bringing the market into balance and giving buyers more clout in the market, says Phil Soper, CEO of Royal LePage Real Estate Services.

"We've been climbing this mountain. We reached the top in 2005 and now we're on a very high plateau," said Soper.

According to Thursday's report, the average price of a two-storey home in Canada rose seven per cent, year-over-year, to $327,269 in the fourth quarter of 2005.

Increases ranged from 21.2 per cent in Victoria (to $325,000), to 15.5 per cent in Calgary ($245,089), 13.2 per cent in Winnipeg, 11.6 per cent in Vancouver ($630,750), 10.2 per cent in Halifax (180,500), four per cent in Toronto ($443,737) and 2.6 per cent in Montreal ($301,181).

A sound and growing economy in Central and Atlantic Canada is fuelling moderate price increases, while demand for homes in the energy-rich West caused prices to surge, Soper said.

For 2006, Royal LePage forecasts the price of the average Canadian home will rise six per cent. Calgary and Edmonton will likely see increases of eight or nine per cent, but prices in Toronto, Montreal and Ottawa will rise by less than five per cent.

Soper says buying activity peaked in 2005, pushing the market into the next stage of the housing cycle this year, as the number of homes sold is expected to fall by three per cent. "There will be less homes sold, but just barely, making it the second most active year in history," Soper said.

"We've lived through a seller's market now for several years, in which if you owned a home and didn't have to move into another one, it was a great time, because you had many more people looking at your property," he added.

"We're coming to a period now where that demand has been satisfied, and where buyers and sellers are entering into negotiations on a more equal footing."

That's not true for all parts of the country. Cities like Calgary and Edmonton will still have inventory constraints as buyers continue to demand more homes than there are for sale.

"But in a lot of parts of the country, buyers do have the ability now to put reasonable conditions on their offer," Soper said, such as making it conditional on financing or a home inspection. "Those are the kinds of conditions that fall away in a very hot market, when there's always someone else wanting to buy the same house," he said.

Earlier this week, Statistics Canada released data showing the prices of new homes rose by about five per cent in 2005 for the third year in a row.

"A steady market for new housing, combined with higher building material and labour costs, pushed up new housing prices at the national level," the statistical agency said.

"The upward pressure on home prices continues," says BMO Nesbitt Burns chief economist Sherry Cooper, adding that prices in Calgary "are suddenly spiking."

Statistics Canada's price index measures the cost of new housing, using the year 1997 for a benchmark of 100 points. On Tuesday, Statistics Canada said the index stood at 132.4 in November, up 0.5 per cent from October, compared with a 0.7 per cent increase the previous month. On a 12-month basis, prices were up 5.5 per cent.

Calgary saw prices increase 3.5 per cent, mainly due to higher costs for drywall, flooring, lumber and excavation and higher lot values.

On Thursday, Royal LePage said that during the fourth quarter, detached bungalows posted the biggest price hikes, rising on average 9.1 per cent from a year earlier to $269,810, while the average price for a condominium unit rose to $190,123, up seven per cent.