Royal LePage warns of real estate 'irrationality'

There are signs that some of Canada's major house markets have become overheated, although most other markets have shown a more healthy rate of moderate growth, according to a national real-estate sales organization.

Prices for all key housing types were up more than 10 per cent across Canada in the first quarter on a national basis, according to the Royal LePage survey released Thursday.

But Vancouver and Toronto prices rose much more dramatically — about 20 per cent in some cases — and the head of Royal LePage Real Estate Services suggested they may have risen too far in those local markets.

"House sale data from the past two-year period shows tremendous variances in terms of how different cities reacted to the recession," said Phil Soper, president and chief executive, Royal LePage Real Estate Services

"In Vancouver and Toronto, for instance, the dramatic unit sales fluctuations exhibit a significant degree of market irrationality: inordinately fearful when faced with poorer markets; and overly enthusiastic when the tables turned."

The Royal LePage survey found the average price of detached bungalows in Toronto climbed to $459,107 in the first quarter, up 13.3 per cent from a year ago.

Standard two-storey homes in Toronto were up 13.2 per cent, rising to $562,150 while condo prices rose a more moderate 10 per cent to $317,579.

In the Vancouver area, detached bungalows climbed an eye-popping 21.8 per cent to $906,045 while two-storey homes were up 19.2 per cent to $987,500 and standard condos were up 15.7 per cent from early 2009, rising to $470,000.

Montreal: a 'more stable' market

In contrast, Soper described Montreal as "an example of a city where the market has been much more stable and homeowners there seem quite happy with the relatively slow pace of change."

The average price of a bungalow in Montreal climbed by 7.2 per cent to $249,172, the price of a standard two-storey house increased by 7.6 per cent year over year to reach $355,109, while the average price of a condominium increased by 7.6 per cent, to $222,244, Royal LePage said.

The survey found that on a national basis, the average price of a detached bungalow in Canada rose to just over $329,000 in the first three months of this year — up 11 per cent from the first quarter of 2009.

Standard two-storey homes rose 10.3 per cent, to about $365,000, while condominium units increased by 10.9 per cent to just under $229,000.