Lofty northern housing prices soften a tiny bit
September 28, 2012
The mainstream media often states that the highest housing prices in Canada are in Vancouver, yet Ft.McMurray’s prices are actually higher. Both places have cooled off a little bit lately.
The average residential house price in Canada was $364K. Yet the larger cities in the north all exceed the Canadian average.
- At the end of QII the average residential house price in Vancouver was $713 K, down from almost $800K a year ago. In Ft.McMurray it’s $758 K, down 1.5% in the past month but up 2.5% in a year.
- In Whitehorse, Yukon, the average residential house price is $418K, up 4.9% from a year ago yet down 3.4% from a year ago. The Yukon Government last week put 95 lots up for tender in its new Whistle bend subdivision for prices in the $125-200K range. Only 25 lots were bid.
- Yellowknife is in the midst of one if its biggest housing booms in years, with plans for up to 600 new housing units this year. The average sale price is expected to rise by another two per cent in 2012 to $382,900.
- The Iqaluit housing market is unique compared to most markets across Canada. Like many Nunavut communities, most of the land or lots in Iqaluit are owned either by the municipality or by the Inuit. The majority of lots are titled to the Municipal Corporation which issues Leasehold Titles for use.
There has been slow and steady inflation in northern house prices over the past 10 years. This has eased so very slightly lately, perhaps because of a change in the CMHC lending rules to make the maximum length of mortgage 25 year instead of 30.
The easy money policies of central banking authorities, including the Fed’s commitment to zero interest rates effectively until 2015, suggest that interest rates will stay low and housing prices will continue to creep upwards. The growing household debt load is concern to the Bank of Canada. However, it is hard for the Bank to diverge from the lead of the super-loose money printing policies of the Fed. If the Bank of Canada were to indicate it was going to raise its bank rate, it would bring about a stampede of investors into the Loonie and raise its value. The Canadian government would find this awkward as the manufacturing sector, the Opposition and the press would decry a rising dollar.
The risks for homeowners in the north:
- higher interest rates may be coming in spite of central bank manipulation. Higher interest rates could quickly lead to lower prices.
- business cycles can affect house prices. In Yellowknife, the large diamond mines are nearing the end of their productive lives.
- local supply and demandis obviously extremely important. Both Whitehorse, and Yellowknife are looking at significant new housing supply coming on the market, after a few years of very little.
- a)Globe and Mail 19-Sep-12 and Barrie McKenna, "In Canada, legacy of Lehman's collapse lives on in ultra low interest rates" 10-Sep-12, pB1.
- c)Chuck Tobin, "Average House price fell from late 2011" Whitehorse Star, 19-Sep-12.