To have a good estimation of where we’re going, it’s important to have an understanding of where we’ve been. Over the last five years, Newfoundland and Labrador has seen an incredible increase in housing prices — with many homes and areas in the St. John’s cumulative metropolitain area increasing in price by more than 50%.

Even from 2009 to 2010, according to the Canadian Mortgage and Housing Corporation (CMHC), the average new home price in the St. John’s CMA went from $281,803 up 15% to $325,436. Some areas increased more than others with Torbay and Paradise leading the way, which is no surprise given the higher end housing which has been developed in parts of those communities.

However, we’ve also seen some slowdowns coming out of 2010 into 2011, with MLS sales reportedly down 4.7% — despite an average price increase in the resale market of 14.8%, up to $251,191. The lesser number of sales with the higher average price could be interpreted as a ‘maxing out’ of the market, in that the affordability of housing is becoming increasingly difficult for many homebuyers, suggesting that the growth will have to slow in 2011. Coupled with that, the average number of listings also went up in the area by 16.6%, meaning that there are more houses out there to buy, and less are selling — meaning that it’s a buyer’s market.

With mortgage rates also at historical lows — best fixed rates have spent much time below 4% over the last year — it isn’t a question of mortgages being too expensive, dollar for dollar. Simply, it seems that it’s requiring too many dollars (and thus, higher mortgages) for people to purchase adequate housing.

CMHC is forecasting that 2011 will show a further decrease in the number of MLS sales — which is resale home, moreso than new ones — yet the prices are expected to stay stable, with a forecasted average price of approximately $255,000. A similar pattern is also expected for 2012.

With this positive — though more muted — economic growth forecast for 2011 and 2012, it still means that purchasing a home or an investment property will prove to be a quality investment. However, it would be prudent to set up your mortgage financing — or refinancing in order to purchase more property — with a mind toward increasing equity through positive cash-flow investments and good affordability, rather than seeking large capital appreciation in a short time. That is, with prices stable, try to pay off your mortgages and debts quickly rather than hoping the value of your property goes up sharply.

For more information from the CMHC Housing Outlook, please feel free to send a request to — I’d be more than glad to answer your questions, and try to develop a plan for you, both in terms of housing and mortgages.