Royal LePage boosts 2023 home price forecast as activity picks up

By
Millicent Wong
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Royal LePage boosts 2023 home price forecast as activity picks up

A earlier-than-expected pick-up in activity in Canada’s major housing markets is prompting real estate firm Royal LePage to raise its forecast for home price gains in 2023.

The real estate company’s home price survey and market forecast for the first quarter of 2023, released April 13, forecasts that the total price of a home will be 4.5 percent higher in the fourth quarter of 2023 than in the final quarter of 2022, significantly higher than a year earlier Forecast for a modest 1% drop.

“Prices are rising faster than they should be simply because the number of homes for sale is so limited as demand increases,” Phil Soper, CEO of Royal LePage, said in an interview.

That surge is “quite a change” in just three months from early 2023, Soper said, adding that the recovery has been stronger for a number of reasons, including stable interest rates and higher-than-expected employment rates.

The Bank of Canada left its benchmark interest rate unchanged at 4.5 percent on April 12 and released updated forecasts that suggest Canada will avoid a recession.

“If you add all of this together, we’ve reached the end of the market correction — the real estate downturn — and the market is growing again, starting around mid-March,” Soper said.

The level of activity in the first quarter of 2023 exceeded the company’s expectations, while total house prices across the country rose 2.8 percent quarter-on-quarter.

Royal LePage said demand is again outpacing supply as buyers return in force, particularly first-time home buyers, while housing supply conditions remain “extremely low”.

Normally, as demand increases, so would the number of new homes for sale, but the inventory isn’t keeping pace, Soper said.

He described first-time home buyers as an “interesting part” of the market because they take from inventory but don’t offer anything, unlike people who sell when they buy.

“I think we’re taking the risk of a large number of new homeowners entering the market and not expanding the inventory and we already have (an existing) challenge with the inventory, which is one of the main reasons our forecast is down had to be adjusted above. ‘ added Soper.

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Royal LePage’s National Property Price Composite is compiled from national property data as well as 62 of the country’s largest property markets.

Quarter-over-quarter, the national median price of a single-family home rose 3.4 percent, while the median price of a condo rose 1.8 percent, the report said.

Total quarterly prices in the Toronto metro area rose 4.8 percent in the first quarter, while the metro areas in Montreal and Vancouver each gained 1.3 percent in the same quarter.

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