The latest Royal LePage House Price Survey reveals that the aggregate price of a home in Canada increased by 1.6 per cent year-over-year to $815,500 in this year’s third quarter. While this reflects a modest annual gain, the national home price experienced a 1.1 per cent decline compared to the previous quarter, signaling sluggish summer sales across much of the country. 

Despite this, the market shows early signs of recovery, with sales volumes beginning to pick up in September. 38 per cent of regional markets recorded positive price growth during the third quarter.

Buyer hesitation despite interest rate cuts

“Despite three cuts to the Bank of Canada’s overnight lending rate, buyer demand nationally remains weak, particularly among two key groups: first-time homebuyers and small investors,” says Phil Soper, president and chief executive officer, Royal LePage. “First-time buyers, who are more sensitive to interest rates, are adopting a wait-and-see attitude. With home prices essentially flat and interest rates steadily declining, they perceive no penalty in postponing their purchase.

Soper goes on to explain that small investors, particularly those who typically purchase condominiums for rental purposes, are also hesitant. Elevated borrowing costs have made these investments financially challenging, including with carrying costs surpassing rental income.

Soper believes both groups will return to the market in significant numbers once property values begin rising again. With further rate cuts anticipated from the Bank of Canada before the end of the year, he expects prices to appreciate faster, which could eliminate the advantages of waiting for first-time buyers and make investments more favourable for small investors.

Buyer readiness + new mortgage rules to boost affordability and unlock opportunities

Royal LePage reports that total listings on royallepage.ca reached a historic high in September, rising 19 per cent year-over-year. This increase in listings reflects a readiness among existing homeowners to move, providing buyers with more choice and reducing competition across the market.

What’s more, the recently announced new regulations regarding mortgages and lending practices in Canada are aimed at easing affordability challenges for homebuyers. These changes are expected to stimulate market activity, particularly for first-time buyers and move-up buyers, by making homeownership more accessible.

“These changes will have more impact on the early 2025 market than many anticipate. Expect a material bump in activity,” says Soper. “In addition to assisting first-time buyers, raising the cap on insured mortgages expands opportunities for move-up buyers in higher-priced markets, thereby freeing up inventory for new homeowners entering the market.

However, Soper cautions that the new rules are not a “silver bullet” for Canada’s urgent housing supply need.

Young Canadians particularly interested in homeownership; consumer confidence on the rise

According to a Royal LePage survey, 84 per cent of Canadians aged 18 to 38 believe homeownership is a worthwhile investment. Of those who don’t currently own a home, 75 per cent plan to purchase property as their primary residence, with 40 per cent intending to buy within the next five to 10 years. Despite current affordability challenges, younger generations remain optimistic about their homeownership goals.

In the report, Soper notes: “The youngest cohort of homebuyers in Canada have no shortage of barriers on their path to ownership. Though the cost of borrowing has begun to come down, chronic supply shortages have kept housing prices from dropping, even as demand softened under the weight of high interest rates.

Despite these hurdles, the next generation of homebuyers remains committed to their pursuit of owning real estate, and are remarkably optimistic that they can make their dream a reality.”

Consumer confidence is also rebounding. The Conference Board of Canada reported a 3.3 per cent increase in its Index of Consumer Confidence in September, reaching its highest level in over a year. More Canadians are now optimistic about making major purchases, including homes.

Renewals at higher rates amid softening interest rates

Even as interest rates begin to soften, many Canadians who locked in ultra-low fixed-rate mortgages before March 2022 are facing increased monthly payments upon renewal.

While the Bank of Canada is expected to continue cutting rates, Soper notes that the reductions won’t be deep enough to eliminate the financial strain entirely for those still holding pandemic-era mortgages. Some homeowners may need to relocate to more affordable areas or downsize, though Canada’s strict lending practices have positioned most homeowners to handle the adjustments.

Regional real estate trends: Uneven recovery

As was the case during the pandemic-driven real estate boom, the market recovery is unfolding unevenly across Canada. Major urban centres like Toronto and Vancouver continue to lag in recovery due to ongoing affordability challenges. These cities saw lower-than-expected activity throughout the spring and summer months.

Conversely, markets in Quebec and the Prairies have shown more resilience during the period of raised interest rates. Soper notes that Alberta has experienced significant population growth, driven by interprovincial migration from Ontario and British Columbia, while the post-pandemic surge in Atlantic Canada has slowed.

Market forecast: Stronger growth expected in 2025

Looking ahead, Royal LePage forecasts a 5.5 per cent year-over-year increase in the aggregate home price for the fourth quarter of 2024. However, this revised forecast reflects current market conditions, especially in Toronto and Vancouver, where sales activity has been slower than anticipated.

Soper anticipates recovery next year continuing in most markets and the potential for price appreciation as the market responds to lower interest rates and the new lending rules: “The market recovery, albeit uneven across the country, is well underway in a majority of markets. While we may not see significant price appreciation in the typically slower fourth quarter of this year, we believe our previous forecast will come to fruition in the anticipated early spring market of 2025.”

Review the full report, including regional summaries.