Wednesday, May 18, 2011

Real estate sales dip but prices continue rise

Canadian home prices continued their upward march in April, driven by strong investor demand in Vancouver, while cracks in the Toronto condominium market may be starting to appear.

The Canadian Real Estate Association said Tuesday the average price of a home sold in April across the country was $372,544, up eight per cent from a year ago. It was the third straight month that the average price rose eight per cent on a year-over-year basis but the Ottawa-based group cautioned that the figure was skewed due to "surging multimillion-dollar property sales in selected areas of Greater Vancouver."

The group also shrugged off slow April sales figures that saw activity dip 4.4 per cent from March on a seasonally adjusted basis and 14.7 per cent on an actual basis from a year earlier.

The slow sales are said to have been driven by new mortgage rules that came into affect April 19 and made it tougher to borrow, leading people to rush into purchases in March.

The same sort of impact was felt in April 2010 as people moved their pur-chases forward to avoid the mortgage rule changes at the time, fear of higher interest rates and the looming implementation of the HST in two provinces.

"This makes it difficult to compare," said Gregory Klump, chief economist of CREA. "Changes to mortgage regulations that took effect in April 2011 likely sidelined a number of firsttime homebuyers. By contrast, higher end homes sales in Vancouver and Toronto had their best April ever."

Greater Victoria sales slid by a seasonally adjusted 6.7 per cent in April from March, beating out the national average of 4.4 per cent. A total of 457 homes changed hands in the capital region last month, down from 490 in March.

On a non-seasonally adjusted basis, Greater Victoria homes sales dropped by 23.7 per cent to 540 last month from 708 in March.

The average seasonally adjusted sale price of a home in the capital region rose 1.2 per cent monthover-month, to $498,536, from $492,807. But if the numbers are not seasonally adjusted, the average price decreased slightly, by two per cent, to $508,005 in April from $518,536 in March.

Worries about the sustainability of the housing market could be stoked by a report from Urbanation Inc., which monitors the Toronto condominium market. The group says more than 50 per cent of condominiums sold in the past year were purchased by buyers who do not intend to occupy their units and plan to rent in many instances.

Condominium rents in Toronto in the first quarter of 2011 were $2.11 per square foot compared to $2.09 a year earlier, a 0.8 per cent increase. Condominiums being registered now and ready to be occupied are priced for sale in the $450-per-square-foot range while newer units are going for $550 per square foot.

"What happens when these newer units hit the market?" said Ben Myers of Urbanation. "At $550 per square foot, a 750-squarefeet [condo] is $413,000. You put 25 per cent down and you have a mortgage of $310,000. Take a five-year variable mortgage at three per cent with 25-year amortization and you get $1,475 a month mortgage. Your condo fee is $345, property tax is $345 and you are up to $2,200 in carrying costs.

That's a huge [operating] loss," given the average rental rate would bring in just under $1,600 a month, he said.

Source: The Victoria Times Colonist

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