Aggregate national price was already rising before the spring buying season
Canadian homeowners could see strong appreciation of their asset this year with some markets posting double-digit year-over-year growth in the fourth quarter.
A new report published today (April 12) by nationwide real estate firm Royal LePage forecasts that the aggregate national home price in Q4 2024 will be 9% higher than in the same period of last year, a significant increase from the firm’s previous expectation of 5.5%.
The revised figure is based on a strong start to the year with the first quarter gaining pace ahead of the spring buying season.
The Royal LePage House Price Survey shows that Q1 2024 saw an aggregate national price of $812,100, up 4.3% year-over-year and 2.9% quarter-over-quarter, setting the scene for a strong market in the months ahead.
“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,” said Phil Soper, the firm’s president and CEO.
The aggregate national price of a single-family detached home increased 4.5% year-over-year to $845,300 in the first quarter, while the median price of a condominium increased 3.5% year-over-year to $591,900. On a quarter-over-quarter basis the increases were 3.6% and 1.9% respectively.
The expectation that price gains will escalate in the second and third quarters and then moderate while still producing the 9% estimated increase in the fourth quarter, is reflective of the likely impact of a BoC rate cut.
“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,” added Soper.
Leading markets
As is often the case, the national price gains will be driven by select major markets, although 89% of regions in the report recorded quarterly price appreciation in the first three months of the year.
First quarter gains, among major regions, were led by Calgary with year-over-year aggregate price appreciation of 9.7% (1.9% on a quarterly basis) but the fourth quarter forecast calls for the greater regions of Toronto and Montreal to lead with increases of 10.0% and 8.5% respectively compared to a year earlier.
“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. 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,” added Soper.
Mortgage renewals
Mortgage renewals at higher rates remain a major concern for homeowners. Many have yet to face a rate hike, but they know it’s coming, but what effect does Soper think this will this have on the market?
“We do not see this as a material drag on the housing market. Two years into the post-pandemic period, about half of mortgages have rolled off those record lows, and Canadians continue to meet obligations to their lenders, with the national mortgage default rate remaining at near historic lows,” he noted. “Further, income growth and the period of flat home prices have helped to mitigate the impact of increased mortgage costs. People will go to great lengths to hang onto their homes, so we can expect a pull-back in discretionary spending, including on travel and entertainment.”
The optimistic tone of Royal LePage’s report is not mirrored by some economists who are less certain that the early strong start to the market this year will endure as affordability and supply issues continue to place barriers in the path of potential buyers.
