Home prices should remain relatively stable throughout the rest of the year, according to Royal LePage, which is downgrading its end-of-year forecast amid slower real estate activity and high rates of borrowing.
The latest house price survey released Thursday found the aggregate price of a home in Canada rose 3.6 per cent in the third quarter of this year compared to a year prior, to $802,900, yet is down 0.8 per cent from last quarter.
Royal LePage had previously forecast the aggregate price would finish the year 8.5 per cent higher than the end of 2022, but is now softening that to seven per cent year-over-year due to the softer-than-expected activity in the third quarter.
The greater Toronto and Vancouver regions saw their home prices decline from last quarter by 2.8 and 1.8 per cent, respectively, which contributed to the slight decrease nationwide.
Elevated interest rates due to the Bank of Canada’s inflation-targeting rate hikes continue to have an impact on the real estate market, according to Royal LePage president and CEO Phil Soper, despite Canadians adjusting to the increased rate of borrowing.
“Once interest rates begin to ease, even by only a small amount, we expect buyers will return to the market in large numbers and the relentless upward march of home prices will begin again,” Soper said in a statement accompanying the report’s release.
Strong employment has helped keep home values from dropping despite the slowdown in sales activity, according to the report.
Across the country, Royal LePage downgraded its end-of-year forecasts for Greater Toronto, Edmonton and Regina, while maintaining its previous forecasts for the greater Vancouver and Montreal regions as well as Halifax, Ottawa and Winnipeg.
Only Calgary is expected to see price increases greater than previously forecast, bucking the national trend. The company is now predicting the city’s aggregate home price will finish the year 9.5 per cent higher than the end of 2022.
Prices rose 1.8 per cent compared to last quarter, by far the biggest increase across major markets nationwide.
September marked the ninth consecutive month that Calgary’s market saw an increase in sales activity, according to Royal LePage, as demand continues to outpace supply.
The city has seen a spike in interprovincial migration following the Alberta government’s successful ad campaign to attract workers from other parts of Canada, which cited lower home prices compared to larger cities like Toronto and Vancouver.
Soper said a lack of housing supply continues to be the biggest obstacle to getting home prices under control.
“Slower activity has allowed critically low inventory levels to build marginally in many regions, yet the quantity of homes available for sale in this country remains well below the level needed to keep a lid on property price increases,” he said.
He applauded the federal government’s recent announcement that it would be removing GST from new purpose-built rental construction, calling it “a step in the right direction.”
The Canada Mortgage and Housing Corp. is estimating Canada will need an additional 3.5 million new homes by 2030 to restore affordability.
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