Royal LePage is lowering its home price expectations and forecasting another decrease next quarter.
According to the Royal LePage House Price Survey released Thursday, the aggregate price of a home in Canada decreased by nearly 5 per cent in the third-quarter of 2022; the second consecutive quarterly decline recorded. This reflects a continued softening of home prices in markets across the country.
Royal LePage forecasts that the aggregate price of a home in Canada will decrease 0.5 per cent in the fourth quarter of 2022 compared to the same quarter last year. The forecast has been revised downward from the previous quarter, reflecting an expected flattening or modest decrease of prices through the remainder of the year, following quarterly declines in most Canadian markets in the third quarter. Of the report’s 62 regions, only four markets posted a quarterly aggregate home price increase in the third quarter (St. John’s, Charlottetown, Montreal South Shore, Saskatoon).
“September did not bring the typical seasonal lift in the number of homes trading hands in this country, a clear indication that our housing market continues to adjust to higher borrowing costs,” said Phil Soper, president and CEO of Royal LePage, in a press release. “Home prices follow sales volume trends, which means we will see further softening in the final months of the year. Our revised outlook has national prices at just below where we ended 2021, erasing the gains made in the first quarter of 2022.”
The Royal LePage National House Price Composite is compiled from proprietary property data, nationally and in 62 of the nation’s largest real estate markets. When broken out by housing type, the national median price of a single-family detached home rose 2.0 per cent year-over-year to $806,100, while the median price of a condominium increased more than 6 per cent year-over-year to $566,100. Price data, which includes both resale and new build, is provided by Royal LePage’s sister company Real Property Solutions (RPS), a Canadian real estate valuation company.
In the third quarter, the aggregate price of a home in Canada recorded an increase of 25.4 per cent over the same period in 2020, and 21.5 per cent over the same period in 2019.
“Home sales volumes have fallen in the face of economic uncertainty and rising rates, but so too have the number of properties available to purchase. With demand and supply falling in tandem, there is limited downward pressure on prices. Canadian home values should end the year well above pre-pandemic levels, retaining much of the gains made during the real estate boom of 2020 and 2021,” said Soper.
The Greater Montreal Area posted a quarterly decline in its aggregate home price for the first time in more than five years, down 5.3 per cent in the third quarter of 2022. This follows similar declines in the greater regions of Toronto and Vancouver, beginning in the second quarter.
“While Greater Montreal’s real estate market proved more resilient than the country’s two other largest urban centres in the spring, the region saw a material decline in sales activity during the summer, as buyer demand dwindled in the face of subsequent interest rate hikes. Sales activity in the country’s largest urban areas remains constrained as global policymakers tackle the scourge of inflation,” added Soper.
Major centres in the Prairies and Atlantic Canada also began to show price depreciation in the third quarter. However, Calgary and Edmonton posted more moderate declines due to their relative affordability and strong migration from other provinces.
According to RPS, requests for property appraisals were down 16 per cent year-over-year in September and down seven per cent year-to-date, indicating that fewer homes are trading hands. Soper believes a flood of pent-up demand will eventually return to the market once consumer confidence is restored.
A recent Royal LePage survey found that almost one in five Canadians (19 per cent) have postponed or deprioritized their home-buying plans this year due to the increased cost of living, including higher interest rates and rising inflation. That figure increases to 29 per cent among Canadians aged 18 to 34. Of those who said they have modified their plans, 40 per cent said they still plan to buy, but at a later date.
