Home prices in Vancouver, Toronto jump sharply again in May

WATCH: More homes were sold in May than any other month in the last five years, creating a frenzy of bidding wars. Mike Drolet looks at where that leaves the average Canadian.

Home prices in Vancouver and Toronto continue to lead the country’s closely watched housing market higher, with the cost of homes in those already pricey cities jumping sharply in May.

Average home prices climbed 11.2 and 11 per cent respectively in the Vancouver and Toronto areas last month compared to a year earlier, according to data released Monday from the Canadian Real Estate Association.

The average home price in the greater Vancouver area was $905,701 in May, compared to $814,417 a year ago, while in the greater Toronto area, the average home price – the blended average selling price across housing types, from detached homes to condos – hit $649,599.

The jumps compare to more subdued conditions elsewhere, with gains notably flattening in Calgary as lower oil prices ripple through to the residential property market.

Elsewhere, prices held steady on a year-over-year basis in Saskatoon and Ottawa, rose slightly in the Montreal area and fell by about three per cent in Regina and Moncton, CREA said.

Distorted

Nationally, the double-digit price gains in Vancouver and Toronto again pulled average home price growth considerably higher. CREA said Monday the average home price in Canada rose 8.1 per cent last month, to $450, 886. Stripping out the jumps in Vancouver and Toronto, home price growth slowed to 2.4 per cent.

“The national average home price continues to be upwardly distorted by sales activity in Greater Vancouver and Greater Toronto,” CREA said.

Policy makers such as the Bank of Canada are closely watching developments in the housing market as prices spiral higher in some centres, stoking concerns of a potential bubble.

MORE: Sturdy as a house of cards? A look at Canada’s property boom 

Canada’s central bank warned last week prices in some places “continue to outpace income growth, and overvaluation in the Canadian housing market remains a concern.”

Benchmark index

CREA relies on its benchmark index, called the MLS Home Price Index (HPI), to get a gauge on home price activity. The association says its HPI tool is a better barometer “because it is not affected by changes in the mix of sales activity the way average price is.”

The MLS HPI rose a more tame 5.17 per cent in May compared to a year earlier, CREA said Monday.

Here’s a look at the HPI benchmark index through April, which still shows the Vancouver and Toronto area markets pulling up the national reading as prices in those markets shoot higher.

The impact of lower oil prices is visibly taking a toll  on the Calgary market, meanwhile, while other cities are posting flat to moderate gains: