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Canada's real estate market is at a 'tipping point', study says

The latest Royal LePage report on Canada’s home sales says prices generally went up in the second quarter and will likely rise further in some areas, such as Toronto and Winnipeg.

But the report suggests Canada’s residential real-estate market appears to be at a tipping point, with some areas likely too expensive for buyers at the current levels.

The national average prices for one-storey bungalows, two-storey detached homes and condominiums all went up in the April to June quarter.

The national average price for bungalows was $376,311, up from $356,625 in the same quarter of 2011 and $356,306 in the first quarter of 2012.

The national average price for two-storey detached homes was $408,423, up from $390,163 a year-earlier and $398,282 in the first quarter of 2012.

The national average price for condos was $245,825, up from $238,064 in the second quarter of 2011 and $243,153 in the first three months of this year.

Most of the major cities tracked by Royal LePage showed increases from the first quarter of 2012 and the second-quarter of 2011.

There were a few exceptions scattered across the country, however, with some types of homes in some cities showing lower local average selling prices.

“Confidence in Canada’s real estate market is sound, but home prices cannot grow faster than salaries and the underlying economy indefinitely,” said Phil Soper, the president and chief executive of Royal LePage Real Estate.

“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.”

He said that changes to mortgage rules introduced by Finance Minister Jim Flaherty over the past four years will keep some people on the side-lines, particularly first-time buyers who account for up to half of the transactions.

Flaherty’s latest changes were announced last month and went into effect on Monday.

“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,” Soper said.