While it was anticipated that oil’s sharp decline would hold some negative consequences for Calgary’s formerly booming housing market, what may have been missed by some was the plunge’s effect on the country’s other booming markets: Toronto and Vancouver.
Home prices in the two red-hot centres are actually accelerating.
New numbers released by Toronto’s real estate board this week are jaw-dropping – the average price of a detached home increased by 20.9 per cent in the suburban “905” region last month, compared to January 2015. In Vancouver, the (already sky-high) price of a detached residential property jumped 27.9 per cent in January compared to the same month last year, to $1.29 million.
Nearly 30 per cent. In one year.
In case you think the eye-popping rise was the result of a handful of sales of extremely pricey homes, there were 1,047 detached homes that traded hands in Vancouver last month, according to the local real estate board, up 34.1 per cent compared to sales activity in January 2015.
More broadly, benchmark home prices, which capture price growth for all home types including condos and townhouses, were up 11.2 per cent in Toronto and 22.9 per cent in Vancouver. Benchmark prices declined a further 3.3 per cent, meanwhile, in Calgary (see chart below).
‘Well now it’s getting pretty dramatic’
“We’ve maintained from day one that the plunge in oil prices will pull down home prices in Calgary, but serve to accelerate gains in Vancouver and Toronto,” Robert Kavcic, an economist at Bank of Montreal said Thursday. “Well now it’s getting pretty dramatic.”
Fears over a possible bubble in Vancouver and Toronto prompted the federal government to move to tap the brakes with the introduction of new mortgage rules in December. The changes will require bigger down payments for buyers and come into effect later this month.
But the changes might not slow the two markets all that much, Kavcic predicted. In fact, it could have also helped accelerate things last month.
“The mere perception in the market that minimum down payments are going up this month is probably pulling forward some sales,” Kavcic said.