Calgary's house prices could firm up in the near future after suffering a 17 per cent correction during the recession.

A new report released Tuesday by BMO Capital Markets said the national housing picture in Canada masks major underlying differences in valuations among three of the country's four largest cities -Vancouver, Calgary and Toronto.

The report flags the possibility of lower prices in Vancouver, steadier to softer prices in Toronto and firmer prices in Calgary in the near future.

Soaring oil prices and rapid inmigration led to a doubling in Calgary's house prices within four years, making the city Canada's housing hot spot five years ago, said the report authored by senior economist Sal Guatieri.

"But lofty valuations, a pullback in oil and the recession spurred a 17 per cent correction between mid-2007 and early 2009. Although the market has recovered more than half of its losses, Calgary is still one of the few Canadian cities -Edmonton is another -that have yet to reclaim prerecession peaks," said the report.

"However, valuations have improved since 2007, with prices at 4.2 times income, less than the national norm. Barring a sharp pullback in energy prices, Calgary's house prices stand a reasonable chance of growing alongside incomes in coming years."

The report said that in April Calgary's average home price of $412,000 was up four per cent from a year ago and had increased by 127 per cent in the past decade. Vancouver's average price of $815,000 was up 5.1 per cent year-over-year and by 188 per cent in the past 10 years. Toronto's average of $477,000 was a 9.1 per cent hike from a year ago and up by 91 per cent over the past decade. The Canadian national average of $373,000 jumped 8.0 per cent in the past year and by 122 per cent in the past 10 years.

According to the Calgary Real Estate Board, the average MLS sale price of a single-family home in the city peaked in July 2007 at $505,920 while the condo price peaked in May 2007 at $332,237. In May, the average sale price for a single-family home was $489,482 while it was $287,384 for a condo.

The BMO report said Canada's real estate market is vulnerable to a correction if there is a rapid rise in interest rates due to higher inflation, an increase in unemployment because of a weak U.S. economy, or a slowing in foreign investment.

mtoneguzzi@calgaryherald.com
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