House price appreciation gap expected to close

In recent years, Western Canada has made the national housing market look a lot better than it really is, but a report released Tuesday says there will be less difference over the next two years in rates of price appreciation throughout different parts of the country.

TD Economics predicts the average price of a resale home sold over the Multiple Listing Service will be about $305,000 this year, making for the third-straight year that the rate of price growth has been more than 10 per cent.

The report says this "remarkable performance" has been skewed by exceptional gains in the West, particularly in Calgary and Edmonton, where prices have gained more than 30 per cent in each of 2005 and 2006.

"National housing market statistics had lost much significance over the last three years due to a marked divergence in performance between the West and the rest," TD said in a statement.

But after bottoming out in late 2006, residential resale markets in Ontario and Quebec -- and Atlantic Canada to a lesser degree -- are expected to accelerate, picking up the slack as Western markets move into a "massive cool down."

"The dispersion [in price growth] will be much narrower than it was," said TD economist Pascal Gauthier.

Gauthier said resale-price growth should slow down to between five and six per cent, nationally, over the next two years. In 2008, Saskatchewan is one of the few areas expected to stand out, with growth in the 15- to 20-per-cent range, he added.

The report says Saskatchewan is "currently on fire" but will follow a similar pattern as Alberta a year from now. It says Saskatchewan, because of its smaller market size, is not skewing national numbers the way Alberta's major cities have.

TD says listings are growing in Calgary and Edmonton, leading to a more balanced market, while the opposite is happening in Ontario and Quebec, where the market is tightening.

Gauthier said a slowdown in economic growth and an erosion of housing affordability are among the factors that have cooled the housing market in Alberta.

He said Canada's strong employment picture is "really a coast-to-coast story," which is helping drive markets in Ontario and Quebec. As well, he said demographic patterns such as an influx of new entries to the housing market and baby boomers retiring is driving demand for condominiums in large cities like Toronto and Montreal.

(prepared by Derek Abma/Vancouver Sun)