Royal LePage expects prices to hold steady through 2023 as homebuyers remain determined
Canadian home prices are set to be maintained through the rest of this year even as market activity is constrained by interest rates and tightening supply.
A new report from national brokerage firm Royal LePage (RLP) says that homebuyers remain determined even though sellers are holding back from listing and this demand vs. supply dynamic is putting upward pressure on prices.
While the national aggregate home price declined year-over-year based on Q2 2023 prices, this was only a 0.7% decrease, while prices were up 4% quarter-over-quarter to $809,200.
RLP says that this is evidence that prices have almost fully recovered from the post-pandemic correction in 2022, and the firm now expects prices to be up 8.5% by the end of the year.
Phil Soper, president and CEO of Royal LePage, says almost all Canadian homeowners have seen the value of their properties appreciate over time.
“A few who purchased at the tail end of the pandemic-fuelled real estate boom saw the value of their homes drop below purchase price during the subsequent market correction," he said "We are close to that pivotal point where people who purchased at the peak would break even if they sold today.”
Approximately one third (32%) of regions in RLP’s report posted year-over-year aggregate price gains in the second quarter, and only four regions reported quarterly declines.
Changing choices
The higher interest rates of the past year have changed the choices of some Canadian homebuyers, perhaps towards lower-cost secondary markets or suburbs.
But for investors and others who are considering selling, Soper says the timing may not feel right.
“The worry that they will be unable to find the move-up home they need in today's tight market is a major concern,” he said. “Further, there are those who secured fixed-rate mortgages at generational lows of 2% or even less, who are understandably reluctant to wade back into a market with substantially higher borrowing costs.”
He added that the tighter supply will drive up prices further, adding to the societal issues around housing affordability.
However, he acknowledges that some buyers will buy even while rates are higher.
"Despite the central bank's decision to start raising interest rates again, many buyers are still in the game. Demand remains strong, particularly among those who have secured a rate hold," said Soper. "Buyers who are determined to make a purchase this year have accepted the reality of higher initial carrying costs, rationally surmising that rates are at or near peak and will become more affordable before long."
Rental market
Increased landlord costs are being passed on to tenants and Soper says the government should ensure affordable options are available.
"In some cities, paying rent has become as expensive as making a monthly mortgage payment. The difference for many young people is the ability to acquire a down payment – whether through savings or with the financial assistance of parents or relatives," he concluded.
