Housing prices will increase 9 percent in the fourth quarter of 2024 compared with the year prior, according to a forecast from Royal LePage that cited “stronger-than-expected” results at the start of 2024.
The aggregate price of a home in Canada rose 4.3 percent year-over-year to $812,100 in the first quarter of 2024, according to the real estate company’s newly released house price survey.
Royal LePage president and CEO Phil Soper said the first quarter saw sidelined buyers rebooting their purchase plans in advance of a more competitive housing market if interest rates drop as expected this summer.
“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,” Mr. Soper said in a press release.
“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.”
The real estate company previously forecast aggregate home prices would increase 5.5 percent in the fourth quarter. The new 9 percent prediction would place the aggregate price at $860,555.
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The aggregate prices of a home in Toronto and Montreal are forecast to increase 10 percent and 8.5 percent respectively in the year’s final quarter, the survey found. That outpaces price gains in Calgary, which was previously expected to see the greatest increase in home values this year.
“Last year, while property values dipped in most markets across the country, the Calgary real estate market bucked the trend and continued to record home price gains,” Mr. Soper said. “While activity levels remain strong and prices continue to rise in Alberta, our research indicates that buyer demand, relative to available inventory, is strongest in the two largest urban centres in the country. We now expect Toronto and Montreal to log the highest home price appreciation this year.”
‘Severe Shortage of Housing’
Mr. Soper is not only predicting a brisk spring market but an “uncomfortably busy fall” as well.
“It is clear we are rapidly transitioning away from a buyers’ market and back to an environment where the seller has the upper hand,” he said, noting the central bank’s expected rate cut will increase traffic.
The Bank of Canada increased its benchmark interest rate to 5 percent in March 2022. The central bank opted to hold it there for the sixth consecutive time April 10, saying it needs to see evidence that “downward momentum” in inflation is sustained before it will cut rates. Most economists expect to see the bank slash rates this summer.
Once rates are cut, more buyers will enter the Canadian real estate market, Mr. Soper said.
“Once the central bank does make a move, and that first highly-anticipated cut to rates is made, even if it is only by 25 basis points, I expect we will see the price appreciation curve steepen upwards when the highly rate-focused crowd jumps into the market,” he said.
Interest rates are not the only issue, however. Mr. Soper identified an ongoing housing shortage as a problem for prospective homebuyers. An insufficient number of homes serves to drive up prices, making the market ultra-competitive.
“While real estate boards across the country are reporting a boost in listings, which is typical as we head into the spring market rush, just about every region from coast to coast remains chronically short of housing supply,” Mr. Soper said. “While we expect that interest rate decreases will draw more buyers back into the ring, this will not be the primary driver of rising home prices—it is the severe shortage of housing in markets small and large in virtually every part of the country that remains the main culprit.”
As competition for homes heats up, buyers can expect price increases in all markets, the company said. The forecasted 10 percent price increase in the GTA by the year’s final quarter will push the aggregate price to $1.24 million while Montreal’s 8.5 percent boost will bring aggregate home prices to $614,987.
Prices are expected to rise 5.5 percent in Vancouver, bringing the aggregate price of a home to $1.29 million, Royal LePage said, while Calgary home prices will rise 8 percent with aggregate prices climbing to $716,580.
The latest forecast comes three weeks after Royal LePage predicted cottage prices will surge across Canada this year. The company said an increase in single-family recreational home prices in 2024 will hit all provincial markets, with value in Ontario climbing more than any other province.
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