As if you needed more proof the London area’s real estate market is scorching hot.
Defying national trends, home prices in the London area are on a tear this year, with the region, along with Ottawa, leading the country for the eighth straight month in year-over-year price increases, figures recently released by Statistics Canada show.
Prices have increased significantly in places like Hamilton and Kitchener, so you have buyers coming from other places and you are still seeing multiple offers on a single property.Earl Taylor
According to the federal agency’s latest housing price index — representing changes over time in the selling price of new residential houses — the year-over-year price for new homes edged down by 0.1 per cent in January, the first 12-month decline in more than nine years.
By contrast, London’s index went up by 3.2 per cent over the same period, posting the largest 12-month gain in January, Statistics Canada said.
Home prices decreased in January in some of the largest housing markets in the country, including Toronto, Vancouver, Calgary and Edmonton.
Prices of resale homes in London are on the rise as well.
Last month, the average home price in the city broke the $400,000 mark for the first time, according to a sales report from the London-St. Thomas Association of Realtors (LSTAR).
Despite the increase, the London region remains among the most affordable markets in the country, surpassed only by Edmonton and Windsor, said Earl Taylor, LSTAR’s president.
And those comparably affordable prices, coupled with a well-performing economy, are attracting new buyers to the region, he said.
“Housing affordability is definitely a factor,” Taylor said. “Prices have increased significantly in places like Hamilton and Kitchener, so you have buyers coming from other places and you are still seeing multiple offers on a single property.”
The London Free Press asked Andrew Scott, an analyst with the Canada Mortgage and Housing Corp., what’s behind the rise in local home prices.
Q What are the main factors behind this trend?
A “We still have seller’s market conditions in (London) mainly because demand is still high there and supply hasn’t really been keeping pace with that demand . . . and that for-sale inventory has come down quite a bit in the last few years. The economy is also doing well in London, with the unemployment in and out of five per cent, which is historically quite low for the region, and we have seen growth in many sectors of the economy.
Q Why have elements that slowed home prices in other regions not had the same effect in the London region?
A “Tighter mortgage rules were aimed at reducing the amount of debt people were taking on as interest rates went up. These rules didn’t affect London as much because the average person buying a home there isn’t taking as much debt as someone in more expensive markets like Toronto . . . London is still quite affordable.”
Q How long can we expect this trend to last?
A “For 2019 and 2020 . . . we see price growth slowing down because it has been strong for quite a while and the Canadian and global economies are slowing down. We still think there will be some price growth because supply hasn’t kept pace, but it will probably not be in the double-digit numbers we are seeing at the moment.”
Q What types of properties are seeing the largest price increases?
A “It’s really happening for all dwelling types, but there has been particularly strong price growth for rows and semi-detached homes just because it is a more affordable segment.”
Q What are the positives and negatives of this home price increases trend?
A Growing prices “are generally a symptom of a healthy economy, with strong population growth as well. On the flip side, if this sort of growth continues for a very long time . . . this leads to greater affordability challenges for a greater portion of the population and increases the need for more affordable housing.”
NEW HOUSING PRICE INDEX
The New Housing Price Index measures changes over time in the selling prices of new residential houses. With the January 2016 price as the base of 100, these figures show January 2019 prices, with January 2018 in brackets.
1 London: 111.2 (107.8)
2 Ottawa-Gatinea: 110.3 (104.8)
3 Vancouver: 108.6 (108.9)
4 St. Catharines-Niagara: 106.6 (104.5)
5 Windsor: 105.6 (102.6)
6 Guelph: 105.1 (104.6)
7 Montréal: 104.8 (101.8)
8 Winnipeg: 104.5 (103.3)
9 Kitchener-Cambridge-Waterloo: 103.9 (103.6)
10 Oshawa: 103.8 (103.8)
Source: Statistics Canada