Photo: Day Donaldson/Flickr
In Toronto and Vancouver, home of Canada’s priciest housing markets, condos have typically been an affordable option for first-time buyers — but that may not be the case if a new trend continues.
Fast-rising condo prices threaten to push more units out of reach, spelling trouble for those looking to enter these markets, suggests the latest Teranet-National Bank House Price Index.
“In both cities, prices of condo apartments used to grow rather moderately in comparison [to single-family homes]. But since the beginning of the year, the real estate boards in both cities have reported record apartment sales,” says Marc Pinsonneault, a senior economist at National Bank, in his analysis.
“As a result, condo price growth [has] accelerated as much as prices of other dwellings,” he adds.
In May, the average index price of a condo climbed 13.9 per cent per cent in Vancouver and 7.8 per cent in Toronto over the same period last year. Appreciation hasn’t tracked this fast in Vancouver since May 2010, while growth in Toronto is the quickest since November 2011.
“The fact that condo prices have recently accelerated in sync with the price of other types of dwellings is bad news for first-time home buyers and should feed concerns about affordability in these metropolitan areas and household indebtedness,” writes Pinsonneault.
The Teranet-National Bank House Price Index averages price appreciation for most properties that have sold a minimum of two times, excluding some transactions, such as those with high resale rates (twice a year or more).
Looking at both single-family and multi-family homes, resale prices increased 1.8 per cent in May alone, according to the index. Compared to a year earlier, prices rose 9 per cent.
Of the 11 major Canadian markets the index tracks, Vancouver posted the strongest annual appreciation.
The average price of a Vancouver home was up 21.7 per cent year-over-year in Vancouver, the sharpest annual gain there since November 2006. Eye-popping 25.1-per-cent growth in the city’s the single-family market helped lift the average.
“Vancouver is in a league of its own,” states Pinsonneault.
Hamilton and Victoria followed with average index gains of 13.8 per cent and 10.8 per cent respectively. Toronto rounded out the top four, as the average home price in that market climbed 10.6 per cent year-over-year in May, according to the index.
These double-digit gains are countered with prices that are either only inching up, flat, or dropping elsewhere. Declines were most pronounced in Halifax, which saw the average price flop 4.7 per cent.
“The dichotomy continues on the Canadian home resale market,” says Pinsonneault.