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Real estate firm Royal Lepage lowers its year-end house price forecast after property markets weakened in a sluggish third quarter.
While the total home price for the three-month period ending in September rose 3.6 percent from a year earlier to $802,900, it fell 0.8 percent quarter-on-quarter.
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Toronto and Vancouver each saw prices decline in the third quarter – 2.8 per cent and 1.8 per cent respectively – while prices in the Greater Montreal area rose 0.6 per cent. Overall market activity was subdued, with 57 percent of regional markets in the study experiencing a downturn in the third quarter.
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Average prices for detached single-family homes rose 3.4 percent year-on-year to $833,600. Condominium prices weren’t far behind, rising 3.8 percent with an average value of $587,400.
Even with the recent increases, the overall house price in Canada is still 6.3 per cent below the peak in the first quarter of 2022 – the peak of the pandemic-fueled real estate boom.
“While trading volumes remain sluggish in most regions, Canada’s real estate market is on solid footing and pent-up demand is increasing,” said Phil Soper, President and CEO of Royal LePage.
Soper noted in the report that a lull in activity in some regions has led to a slight increase in housing inventory. However, the supply of homes for sale is still not enough to keep property prices under control.
He said the real estate market still faces multiple challenges, such as the extended life expectancy of the baby boomer generation, changes in the structure of Canadian households and a large influx of immigrants.
Soper predicted a revival of the real estate market once interest rates begin to fall.
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“If you look back over the last half century, today’s mortgage rates are in the normal range and well below the double-digit lending rates of the 1980s,” he said. “It is the wide gap between Canadians’ ultra-low pandemic-era mortgages and today’s interest rates that has dampened activity. As with the introduction of the mortgage stress test, the market will adapt. It just takes time.”
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Although Royal LePage had to adjust its forecasts – the company now expects home prices in the fourth quarter to be seven percent higher than in 2022, up from a previous forecast of 8.5 percent – Soper remained optimistic.
“While activity has slowed in recent months and inventory levels are rising, we strongly expect house prices to remain stable for the remainder of the year, with moderate increases in some markets,” he said.
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