The recently-released Royal LePage House Price Survey and Market Survey Forecast shows strong year-over-year price increases for all housing types in Winnipeg.
Standard condominiums continued to have the largest year-over-year average price gains climbing 9.2 per cent to $190,857. Prices for standard two-storey homes saw an increase of 4.7 per cent year-over-year to $321,875, while detached bungalows rose 8.2 per cent to $304,250.
“Standard condominiums and detached bungalows are at more accessible price points,” said John Froese, broker of Winnipeg-based Royal LePage Prime Real Estate. “The large price gains in these housing types represent the lower end appreciating as a result of first-time buyer demand.
“Half of all sales were a result of multiple offers and most of those sales were in the lower end of the market,” said Froese.
Froese said that recent regulatory changes to mortgage lending will make it more difficult for first-time buyers to get into the market.
Among the new measures primarily affecting first-time home buyers, federal Finance Minister Jim Flaherty announced that as of July 9, the maximum amortization period for a mortgage was reduced to 25 years from 30 years. In 2008, it had been 35 years.
The lowering of the amortization period to 25 years will add an extra monthly payment of $150 on a $300,000 mortgage.
For first-time buyers, it is equivalent to a one-per-cent hike in interest rates.
In addition, the government has fixed the maximum gross debt service ratio at 39 per cent from 44 per cent.
“It will be difficult to predict the extent of the impact these changes will have on Winnipeg's housing market when first-time buyer activity represents such a large portion of sales,” added Froese. “It could be significant.”
Despite the recent mortgage rule changes, Winnipeg's housing market is expected to remain strong throughout 2012. Royal LePage is predicting an average house price increase of 5.4 per cent in 2012 compared to 2011.
Nationally in the second quarter, standard two-storey homes rose 4.7 per cent year-over-year to $408,423, while detached bungalows increased 5.5 per cent to $376,311. Average prices for standard condominiums increased 3.3 per cent to $245,825.
During this period, signs from across the country clearly indicated that the national housing market was at a turning point, with some major regions continuing to grow unabated while others peaked and began to pull back for the first time in three years.
“We have had three years of solid house price appreciation in almost all regions of the country,” said Phil Soper, president and CEO of Royal LePage Real Estate Services. “Confidence in Canada’s real estate market is sound, but home prices cannot grow faster than salaries and the underlying economy indefinitely. Some regions have reached or perhaps even exceeded the current upper level of price resistance as buyers have embraced an era of historically low mortgage rates."
The first-time buyer segment of the population, which represents up to half or all transactions and where activity strongly correlates to low interest rates, is expected to be slowed by recent regulatory changes that will reduce access to insured mortgages.
“The most recent set of mortgage changes, the fourth in four years, is also the most aggressive,” added Soper. “The cumulative impact of these new regulations has created a significantly higher hurdle for young buyers seeking their first home and comes at a time when the market was slowing of its own accord. The timing of this intervention was unfortunate.”