Canadian Housing Market Gathers Momentum As U.S. Market Slumps
by Jason Simpkins
While the U.S. housing market continues to slump, the outlook is much better for America’s neighbors to the north, where the Canadian housing market continues to pick up momentum.
Royal LePage Real Estate said in its quarterly report that the average Canadian house price is expected to rise by 9.5% to reach $286,775 by the end of this year. The number of transactions is seen rising by 8%.
“The momentum from the year’s extraordinary start spilled into the second quarter, compounding typically busy spring market activity and stimulating solid price appreciations in almost all regions of the country,” said Phil Soper, president and chief executive of Royal LePage.
Standard condominiums gained 15.1% year over year to $494,307 and standard two-story houses were up 13.2% to $378,070. The highest average increase was for standalone bungalows, which jumped more than 15% to reach $320,592.
Canada’s strong economy appears to be providing some of the tailwind that home prices are benefiting from. Canada’s purchasing activity at midyear has been accelerating at a much faster rate than expected. Data released by Statistics Canada showed that building permits for the month of May soared to a record high of $6.44 billion, accelerating by a much-faster-than-expected rate of 21.4%.
The impressive numbers appear to be strengthening the Royal Bank of Canada’s resolve to raise interest rates next week. Most economists continue to predict the bank will raise its key rate by 25 basis points to 4.5%.
The Royal Bank of Canada has stated quite directly that, “The permits data will have no direct impact on the bank’s monetary policy decision next week, but the positive surprise in this report supports the case for a rate hike.”
Meanwhile, a crippled U.S. housing market continues to writhe. The National Association of Realtors recently said its index of pending home sales, a forward looking gauge, slumped sharply by 3.5% in May to 97.7- its lowest since September 2001.
