Residential property prices are still increasing in Canada, but at a more moderate rate, according to the latest MLS Home Price Index.
It increased by 5.1% in March 2012 compared to the same month last year. The increase was on par with February’s gain, which was the smallest since last June. The monthly gain was 1.3%.
Toronto posted the largest year on year increase at 7.3%, followed by Vancouver at 5.3%, the Fraser Valley at 3.3%, Calgary at 2.6%, and Montreal at 2.2%.
Year on year gains were largest for one and two storey single family homes, which rose 5.4% and 6.8% respectively. Apartment prices climbed 3%, and town house prices were up 2.6%.
Overall price trends show that Canada’s housing market continues to moderate, according to Wayne Moen, president of the Canadian Real Estate Association (CREA).
‘Price increases have been shrinking since last autumn. While that trend paused in March, it may in part reflect an early spring in many parts of the country, resulting in increased competition among buyers. That said, headline numbers mask some important differences in price trends among local housing markets and housing types,’ he explained.
The index typically experiences these types of month on month gains in the spring, which coincides with when the balance of supply to demand is tightest, according to Gregory Klump, CREA’s chief economist.
‘With that in mind, it’s important to look at month to month movements in the context of how they compare to the same period in previous years. While the overall monthly price increase was on par with last year’s figure, it masks slowing price momentum in the Lower Mainland area of British Columbia. Slower price gains there were offset in March by a modest acceleration of price gains in Calgary, Toronto, and Montreal,’ he explained.
Because the MLS HPI is composed of four Benchmark housing types and more than 1,600 sub-areas spread among five housing markets, the overall index can mask price trend variations among benchmark housing categories within a single housing market and between different parts of the country.
Price gains for two storey single family homes have surpassed this in other housing categories since the beginning of the economic recovery. Despite a recent deceleration in gains, two storey single family homes posted the strongest year on year price gains in March. By contrast, price gains for one storey single family homes picked up in March, which was driven mainly by increases in Montreal and Toronto, CREA points out. There are also significant differences between housing markets.
In Montreal, townhouse unit prices are rising faster than prices for other housing types. This likely reflects the desirability of their location, since townhouse units are predominantly centrally located while single family homes are often located further from Montreal’s city centre.
Price gains have remained strongest in Toronto since the middle of 2011. The rise in Toronto’s Composite MLS HPI was 2% above the year on year increase in Vancouver’s composite index. This represents the largest spread for price growth between these two markets in more than a year.
CREA says this gap may widen further, since the Vancouver market is showing signs of coming off the boil while a lack of available supply relative to demand keeps Toronto’s housing market in seller’s market territory.