Prices up some 11% across the country

A continued rise in consumer confidence helped push up Canadian home sales and prices in the first quarter, but interest rate hikes expected later this year should cool the market, Royal LePage said Thursday.

House prices were up in all key housing types surveyed by Royal LePage, building on the momentum of the previous two quarters.

The average price of a detached bungalow in Canada rose 11% year-over-year to $329,209 in the first quarter, the survey showed. Standard two-storey homes rose 10.3% to $365,141, and standard condominiums increased 10.9% to $228,963.

In Toronto, on average, detached bungalows had the largest year-over-year price increase, climbing 13.3% to $459,107. This is in contrast to the first quarter of 2009, when the same property type fell 6% in value from its previous year. Prices for two-storey homes were up 13.2% to $562,150 after a decrease of more than 5% from first quarter 2008 to first quarter 2009. Condominiums rose 10% to $317,579 after decreasing 3% from first quarter 2008 to first quarter 2009.

"Even in our most frenzied pockets of market activity, the inevitable rise in interest rates coupled with home price appreciation will rein in demand as affordability erodes," said Phil Soper, president and chief executive of Royal LePage Real Estate Services.

"Expect house prices to continue to rise, but the rate of appreciation should ebb steadily, month by month, throughout the remainder of the year, as balance returns to the industry."

Many market watchers expect a burst of sales in the spring before new mortgage rules, higher interest rates and new tax regimes in Ontario and British Columbia kick in later in the year.

Meanwhile, two of the country's busiest markets continued to show firm gains. Vancouver posted the strongest year-over-year gains as detached bungalows rose 21.8% to $906,045, while other housing types rose between 15.7% and 19.2%.

Greater Toronto home prices rose 10% to 13.3% year-over-year in the first quarter.

(prepared by Ka Yan Ng/Reuters/with files from National Post)