‘Distorted’ home prices in Vancouver, Toronto push market higher

The average home price in the Greater Vancouver Area across all housing types -- detached, semi, townhouse and condo -- was $866,772 in July. Credit/The Canadian Press

Average home prices in Canada jumped strongly again in July, new figures from the country’s real estate association released Friday show, mainly as a result of sustained exuberance among buyers in Vancouver and Toronto.

“These [cities] remain the only places in Canada where home prices are growing strongly,” Gregory Klump, chief economist at the Canadian Real Estate Association, said in a statement.

The average home price climbed 8.9 per cent last month, to $437,699, but excluding the “distortion” created by Vancouver and Toronto – which account for 60 per cent of the national market – prices climbed a much more tame 4.1 per cent (to an average $341,438).

“The reality is that, outside of those two markets, price trends are very well distributed and contained overall,” BMO economist Robert Kavcic said.

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“The national average home price continues to be upwardly distorted by sales activity in Greater Vancouver and Greater Toronto, which are among Canada’s most active and expensive housing markets,” the industry association said.

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The average home price in the Greater Vancouver Area across all housing types (detached, semi, townhouse and condo) climbed 7.7 per cent in July, to $866,772. In Toronto, the average price popped 10.6 per cent to an average of $609,236.

Only B.C.’s Fraser Valley posted a bigger jump. Prices in the region, which sits adjacent to Vancouver, were up 13.5 per cent to $503,722.

Warning signs

The association’s monthly numbers were released a day after the federal housing agency warned that Toronto is approaching a potential correction.

A new report from Canada Mortgage and Housing Corp. named Toronto alongside Regina and Winnipeg as cities now facing a “high” risk of downturn stemming from a combination of factors including overvalued home prices.

MORE: Toronto, Winnipeg, Regina face ‘high’ risk of housing downturns, report says

The CMHC report says a rapid increase in home prices this year and overvaluation are responsible for the growing risk. The report followed on a July 30 commentary from TD Economics that suggested risks are rising both in Toronto and Vancouver.

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“When we put it all together, key housing indicators on balance continue to highlight the vulnerability of the Toronto and Vancouver housing markets to a significant correction in activity and prices,” the TD report said.

 Below: The June reading for the MLS Home Price Index for single-family homes. The benchmark tool is a “better gauge” of price growth than comparing year-over-year averages, the housing industry says, because “it is not affected by changes in the mix of sales activity the way that average price is.”

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