House prices rise higher still

Large price increases for homes in British Columbia, Alberta and Ontario are behind a national surge in real estate sales, with the average selling price of a Canadian home last month rising nearly four per cent to a record $268,215, the Canadian Real Estate Association reported Thursday.

The national price jump, the second steepest increase in 15 years, left the average selling price up 12.3 per cent from a year earlier.

In British Columbia, average residential prices provincewide climbed to $380,420 in February, a 22.1-per-cent jump over the same month last year. Alberta posted a 23.1-per cent jump to $256,125 while prices in the Northwest Territories climbed 24.5 per cent to $307,813.

The overall housing market remains hot, and is hottest in Western Canada, said association chief economist Gregory Klump.


"A shortage of homes available for sale and the continuation of strong resale housing demand in Western Canada are resulting in substantial price increases there," Klump said.

He added that part of the surge in prices may have been because of a larger proportion of more expensive homes in the mix. Month-to-month changes in the average selling price can be volatile, he noted.

The seasonally adjusted number of homes that changed hands in February edged up 0.2 per cent to 41,555, the fifth highest monthly level on record, as increases in sales in Ontario and Quebec more than offset a 1.1-per-cent drop in British Columbia.

Sales volume for the first two months of the year was running 17 per cent above the same period last year.

The value of sales in February was $11.2 billion, up 1.5 per cent from January and an all-time high, with new records being set in Alberta, Manitoba, Ontario, Prince Edward Island and Newfoundland, and all-time highs for the month of February in all the other provinces.

"Although the national resale housing market has so far shown few signs of slowing, rising interest rates and home prices are expected to gradually slow resale housing market activity this year . . . towards a soft landing," Klump said. "We do expect that affordability will continue to erode."

Earlier this week, RBC reported that its index of housing affordability deteriorated at the end of last year to its worst point in a decade. The index, based on the amount of pre-tax income needed to cover the costs of homeownership, rose to an average of 37 per cent from 35.6 per cent in the third quarter, with the index as high as 57 per cent in Vancouver.

The real estate association expects the benchmark five-year mortgage rate of 6.3 per cent will rise this year by no more than half a percentage point from its current level.

"Given that consumers can still negotiate discounts off the posted rate, rates this year will remain at very good levels for housing markets," Klump said. "It's just that the increase in administered lending rates, which are tied to the bank rate, will slow down consumer spending."

(prepared by Eric Beauchesne/Vancouver Sun