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Thursday, December 01, 2005

Edmonton home prices to rise by 8% in 2006

Every year Royal Lepage puts out a study predicting what the future holds for real estate in Canada. To be honest, I don't remember how accurate their predictions have been in the past, but the exerpts from the study below show that western Canada is set to lead the country and Edmonton will have the second largest increase in home prices... certainly worth a look:

– Momentum from record year to sustain growth in 2006 –

TORONTO, December 1, 2005 — After posting record growth in both price appreciation and sales this year, Canada’s housing market is expected to enjoy solid but more moderate growth in 2006 according to the Royal LePage Real Estate Services 2006 Market Survey Forecast released today. National average house prices are forecast to rise by 6 per cent to $271,800 in 2006, while transactions are projected to fall slightly from this year’s anticipated record high of 482,000 unit sales to 467,540 (–3.0%) unit sales.

The strength of the Canadian market is expected to mitigate the expected slowdown in residential housing resale activity in 2006 as strong economic fundamentals sustain healthy growth in the housing market across the country, with particular strength seen in the West. However, higher home prices in major markets, a general public perception of slower market conditions and moderate interest rate increases are forecast to temper market activity as unit sales pull back from the record highs of 2005.

“Those looking for a break from the frenetic pace that has recently characterized the housing market will see some moderation next year, but the effects of an unusually strong fall market are expected to carry through into the first half of 2006, with the upward pressure on prices to continue in most areas of Canada,” said Phil Soper, president and chief executive officer of Royal LePage Real Estate Services.

Added Soper: “While more balanced conditions are expected, as demand slows to meet supply, housing starts ease and the underlying Canadian economy continues to operate at near full capacity, prices should rise in most regions. The effect of higher home prices and low but increasing interest rates, should result in slightly reduced home sales activity overall.”

Higher prices for Canadian oil and gas will be one of the major factors influencing the market in 2006. In 2005, western provinces enjoyed higher rates of in-migration and job growth as momentum in the housing market shifted to the West. Increased demand for labour in the energy sector as well as in mining, construction and transportation translated into higher wage growth in the West. Corresponding higher consumer spending will sustain sizable gains for the housing markets in Alberta, British Columbia and Saskatchewan well into next year.

“The Canadian energy industry is enjoying a renaissance, with much higher commodity prices making previously uneconomical oil and gas reserves attractive to produce. The spill-over effect of increased capital spending, rising personal earning and the subsequent increase in population through migration, will allow real estate markets in western Canada to outpace the rest of the country,” said Soper.

Highlights of average house prices for the nine markets examined reveal that in 2006 the three most affordable cities to buy housing will be Regina ($138,000), Winnipeg ($152,000) and Halifax ($202,800), while the three most expensive cities to purchase real estate will be Vancouver ($469,700), Toronto ($364,000) and Calgary ($283,400).

Canadian Housing Trends: 2006 Market Survey Forecast



2006 Forecast

2005 Projected

Reflecting Alberta’s current economic strength, Calgary property values are expected to post the greatest increases next year, rising by an anticipated 9.0 per cent – closely followed by Edmonton at 8.0 per cent.

The most marginal increase will be seen in Montreal, with an expected 2.0 per cent price appreciation in 2006.

2006 Trends at a Glance

Market fundamentals
– Canada’s economy is poised for continued growth in 2006. With unemployment levels at near historic lows, positive job and income growth across the country and solid population growth resulting from higher immigration quotas in 2006, a positive and healthy housing market is expected.
Mortgage rates – Anticipated interest rate increases in the coming year are expected to be modest and the effect on the real estate market should be minor to moderate.
Canadian dollar – Economic growth in the U.S., and a subsequent increase in demand for Canadian exports, has mitigated the negative effect of a higher Canadian dollar on the manufacturing sector.
New home market – Housing starts will ease in the coming year as a result of a more competitive resale market, higher construction costs and moderate increases in mortgage carrying costs.
Momentum in the West – Momentum in the country’s housing market has clearly shifted from Central Canada to the West. Looking ahead to 2006, housing markets in Alberta, British Columbia and Saskatchewan will continue to benefit from high energy prices and are expected to enjoy growth well above the national average.
Transportation and traffic congestion – The cost of gas as well as increasing congestion affect buyers in the two areas they value most – time and money. Existing homes close to transportation corridors and public transit will be increasingly sought after and this will be reflected in higher market activity in these areas. Infill new housing construction in inner city and downtown locations will also increase as a result.



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