In its House Price Survey released today, Royal LePage forecasts the aggregate price of a home in Canada will increase by 9 per cent in 2024’s fourth quarter, compared to the same period last year. This figure increased 4.3 per cent year over year to $812,100 in the first quarter of 2024, which was stronger than expected.
The national aggregate home price increased 2.9 per cent, indicating sidelined buyers are entering the market ahead of expected interest rate cuts.
More motivated buyers trying to beat rising prices
“Consistent with our previous forecast, the market did reach a critical tipping point in the first quarter of 2024, when home prices bottomed out and began to appreciate again. Clearly, more and more buyers are motivated by the need to get ahead of rising home prices, rather than adopting the strategy of waiting for mortgage rates to fall,” says Phil Soper, president and CEO, Royal LePage.
The Canadian housing market has witnessed robust price appreciation and heightened sales activity within the first few months of 2024. Since July 2023, the Bank of Canada has maintained steady rates through six review periods, prompting many homebuyers to enter the market ahead of an anticipated competitive spring season.
Price appreciation and buyer activity expected to increase post-rate cut
“Many consumers – particularly first-time buyers – who have the capacity to transact have accepted and adapted to the higher borrowing cost environment. Thus, the modestly rising home prices we are experiencing today,” continues Soper. He expects price appreciation and buyer activity to increase once the central bank makes that first highly-anticipated rate cut.
According to the Royal LePage National House Price Composite, the median price of a single-family detached home in Canada increased by 4.5 per cent year-over-year to $845,300, while condominium prices rose by 3.5 per cent to $591,900.
Supply still critically low nationwide
Despite a boost in listings as the spring market approaches, housing supply remains critically low across the country. This shortage continues to be the primary driver of rising home prices, overshadowing the impact of interest rate decreases.
While Canada’s housing market has yet to fully recover from the post-pandemic correction, the aggregate home price remains above pre-pandemic levels. The market is expected to see continued price appreciation, with Toronto and Montreal outpacing Calgary in home price increases.
Federal government moves
The federal government has proposed measures to combat the housing supply and affordability crisis, including initiatives to speed up housing construction and boost rental supply. However, experts emphasize the need for policies focused on incentivizing rapid home construction and investment in rental accommodation to address affordability issues.
Last year, Canada welcomed more than 470,000 new permanent residents. If this growth continues, the CMHC reports another four million homes will be needed by 2030 to see affordability levels where they were 20 years ago. However, the federal government announced it’s working to reduce the number of temporary residents from 6.2 per cent to 5 per cent of the national population by 2027.
“The reduction of non-permanent residents, which includes international students, should have a material impact on Canada’s extremely tight rental market, easing the rate at which rents are rising by reducing competition for limited properties,” says Soper. “This move comes at a cost, however. Non-permanent residents are critical to addressing our labour shortages and are an important engine of economic growth. We will undoubtedly be easing quotas up again in the near future.”
Read the full report here.
