First quarter expected to show double-digit
year-over-year declines, with modest quarterly price growth in the
second half of next year
- On a quarter-over-quarter basis, prices expected to flatten in
Q2 and begin modest improvement in second half of the year, ending
2023 on upward trajectory; release includes national aggregate
quarterly forecast for 2023
- Condominium prices expected to outperform single-family homes
in all major markets except Edmonton and Winnipeg
- Greater regions of Toronto and
Montreal forecast to see Q4 2023
aggregate price decline of 2.0% year-over-year
- Q4 2023 aggregate home price in Greater Vancouver projected to dip 1.0%
year-over-year
- Despite declining affordability, heightened by rising interest
rates, continued housing supply shortage acts as a floor on home
price declines
TORONTO, Dec. 13,
2022 /CNW/ - Since the Bank of Canada began raising interest rates
aggressively in March of this year, home prices in many major
markets across Canada have been
decreasing. The rate of decline, however, has been modest.
According to the Royal LePage Market Survey Forecast, the
aggregate1 price of a home in Canada is set to decrease 1.0 per cent
year-over-year to $765,171 in the
fourth quarter of 2023, with the median price of a single-family
detached property and condominium projected to decrease 2.0 per
cent and increase 1.0 per cent to $781,256 and $568,933,
respectively.2
_____________________________
|
1 Royal LePage's aggregate home
price is based on a weighted model using median prices and includes
all housing types.
|
2 Price data, which includes both
resale and new build, is provided by Royal LePage's sister company
RPS Real Property Solutions, a leading Canadian valuation company.
Price forecast reflects Q4 2023 over Q4 2022
projections.
|
"After nearly two years of record price appreciation, fueled by
a steep climb in household savings, very low borrowing costs and an
overwhelming desire for more space during the COVID-19 pandemic,
the frenzied housing market overshot and the inevitable downward
slide or market correction began, intensified by rapidly rising
borrowing rates," said Phil Soper,
president and CEO, Royal LePage. "In
an era characterized by the unusual, this correction has not
followed historical patterns. While the volume of homes trading
hands has dropped steeply, home prices have held on, with
relatively modest declines. We see this as a continuing trend."
Soper continued, "Much focus has been directed at the negative
impact of rising rates; there has been far less discussion on
factors supporting home prices."
The higher cost of borrowing erodes affordability, which
historically has pushed people out of the market, reducing demand
and resulting in falling home prices. Conversely, there are a
number of factors supporting home prices in the current
environment.
The supply of homes for sale must exceed demand in order for
prices to drop materially. Canada
is struggling with an acute, long-term housing supply shortage.
Organic demand is supported by the current lifecycle of our large
millennial demographic and a record number of new immigrants who
need to be housed. Smaller household sizes mean more housing units
are needed per capita than in the past. Pent-up demand is growing
from buyers who have the ability to transact but have chosen not to
in these turbulent times.
Low unemployment, and a large buffer of unfilled job vacancies,
means that few families are likely to need to sell their homes for
financial reasons. Homes are modestly cheaper today than at the
height of the pandemic boom, offsetting some of the impact of
rising rates, and household savings remain above long-term norms,
making it easier to overcome down payment hurdles.
"Traditional wisdom says that a recession triggers widespread
job losses and missed mortgage payments. People are forced to sell
or the bank forecloses and lists the property, flooding the market
with new listings when demand is weak. In this post-pandemic
period, people have kept their jobs. In fact, they have seen wages
and salaries rise," said Soper. "We have a tightly managed national
mortgage portfolio, with historically low default rates, supported
by homeowners who have been required to qualify for a loan under
the strict federal stress test for the last five years. And, we
can't forget that Canada has been
grappling with an acute shortage of homes overall. We simply don't
see the factors at play that would result in a large drop in home
values."
While home prices nationally are forecast to see modest
quarterly gains in the third and fourth quarters of 2023, values
are expected to remain lower than the same periods in 2022
throughout the year. The aggregate price of a home in Canada is forecast to be 12.0 per cent lower
in Q1 of 2023, compared to the same quarter in 2022, reflecting a
2.4 per cent decline over the fourth quarter of 2022. In the second
quarter of next year, the national aggregate price is forecast to
be 7.5 per cent lower year-over-year, and remain virtually flat on
a quarterly basis. In the third quarter, homes are expected to be
2.0 per cent lower year-over-year, reflecting a 0.7 per cent
increase on a quarterly basis. And, in the fourth quarter of 2023,
the national aggregate price of a home is expected to end the year
1.0 per cent below the same quarter in 2022, an increase of 0.8 per
cent quarter-over-quarter.
"Comparing prices to the previous year, the first quarter of
2023 should show the deepest decline in home values," said Soper.
"At that time, we will be comparing 2022's final weeks of pandemic
housing market excess - when home prices reached historically high
levels - to a much quieter market, where values have had a full
year to moderate. We expect year-over-year comparisons to show
progressively less price decline as the year goes on, with small
week-to-week improvements in the third and fourth quarters,
allowing Canadian home values to end 2023 essentially flat to where
we are today."
The recovery is not expected to be evenly distributed. Regional
markets that saw more moderate price growth during the pandemic
real estate boom are expected to experience more modest declines.
Due to their relative affordability, cities like Calgary, Edmonton and Halifax are expected to record modest price
gains in 2023, as they continue to attract out-of-province buyers,
especially first-time homebuyers from southern Ontario and British
Columbia looking for more affordable housing.
While home prices have come down from the record highs recorded
in the first half of this year, they remain well above pre-pandemic
levels. The projected aggregate price of a home in Canada in the fourth quarter of 2023 is
expected to sit 15.0 per cent above Q4 of 2020, and 18.4 per cent
above Q4 of 2019.
Without a significant increase in housing supply, a return of
buyers to the market, some driven by very high rental rates, should
start to put upward pressure on prices again. And, in a
tight-inventory market, sellers will remain hesitant to list their
properties if they are unable to find a move-up home to
purchase.
"It's important to note that many would-be buyers currently
sitting on the sidelines have not been forced to exit the market.
While some of these families have been priced out for now by rising
borrowing rates, we believe some have voluntarily adopted a
wait-and-see attitude, not wanting to buy a property today that may
be worth less tomorrow. Yet people in their thirties, forties and
fifties have known only a Canada
where home prices rise faster than incomes. When interest rates
appear to have stabilized, these buyers may jump back into the
market, anticipating a return to escalating home values," concluded
Soper.
Royal LePage 2023 Market
Survey Forecast Table:
rlp.ca/table_2023forecast
Royal
LePage 2023 Quarterly Forecast Table:
rlp.ca/table_2023quarterlyforecast
MARKET SUMMARIES
Greater
Toronto Area
In the Greater Toronto Area,
the aggregate price of a home in the fourth quarter of 2023 is
forecast to decrease 2.0 per cent year-over-year to $1,056,734. During the same period, the median
price of a single-family detached property is expected to decline
2.5 per cent to $1,329,413, while the
median price of a condominium is forecast to increase modestly by
1.0 per cent to $701,243.
"The city of Toronto and the
surrounding regions have seen some of the steepest price declines
in the country since interest rates began climbing earlier this
year. Still, home prices remain out of reach for many would-be
buyers, putting a lot of extra pressure on the rental market, which
has seen prices spike in recent months," said Karen Yolevski, chief operating officer, Royal
LePage Real Estate Services Ltd. "We believe the bulk of the price
correction in the GTA has already occurred and that a return to
more normal trends is on the horizon."
Yolevski noted that activity levels are expected to pick up
again by the middle of next year, provided interest rates stabilize
and consumer confidence is restored.
"Lack of supply is still a huge challenge in southern
Ontario. I expect buyers who have
been waiting for prices to level off will encounter increased
competition when they re-enter the buying cycle, specifically in
the more affordable condo segment, although not at the levels seen
in 2021 and early 2022," said Yolevski. "Development has slowed as
a result of labour shortages and the increased cost of construction
materials. A significant boost in inventory will be needed in the
coming years to satisfy sidelined demand and an increasing number
of newcomers."
Royal LePage 2023 Market
Survey Forecast Table:
rlp.ca/table_2023forecast
Royal
LePage 2023 Quarterly Forecast Table:
rlp.ca/table_2023quarterlyforecast
Greater
Montreal Area
In the Greater Montreal Area,
the aggregate price of a home in the fourth quarter of 2023 is
forecast to decrease 2.0 per cent year-over-year to $532,238. During the same period, the median
price of a single-family detached property is expected to decrease
2.5 per cent to $588,315, while the
median price of a condominium is forecast to dip 1.5 per cent to
$421,383.
"The increase in borrowing costs, everyday consumer goods and,
more recently, municipal taxes, combined with weaker demand, should
continue to put downward pressure on prices in Greater Montreal in 2023," said Dominic St-Pierre, vice president and general
manager, Royal LePage Quebec. "While the price correction is now
mostly behind us, we're forecasting that prices will continue to
decrease slightly in the first half of the year, before rebounding
modestly over the following six months, once interest rates have
stabilized. At that point, it is expected that many buyers who have
adopted a wait-and-see attitude will return to the market."
As they wait for the economic situation to improve, families in
Montreal will continue to seek
ways to address their reduced budgets and disposable income. The
household savings rate, which has remained surprisingly higher than
during the pre-pandemic period, is expected to shrink as inflation
continues to squeeze Canadians. As a result, buyers will look to
condominiums as an alternative, given their relative affordability.
Single-family homes are likely to see greater price declines than
the condominium segment, since these properties appreciated the
most during the pandemic boom, yet entry-level detached homes
remain out of reach for many, especially first-time buyers.
"The Greater Montreal Area
remains likely to attract buyers from other Canadian provinces, due
to the real estate market's relative affordability, as it did in
2022. On the other hand, the market has already begun feeling the
effects of the two-year ban on foreign buyers, which is set to come
into effect on January 1st. While a
slight increase of international buyers entered the market when the
announcement was made, demand from foreign buyers has diminished
significantly as the year comes to a close," noted
St-Pierre.
Despite these disruptions and the projected decline in home
prices, buyers who purchased a residential property before the
onset of the pandemic have seen an appreciation of nearly 25 per
cent today, compared to the end of 2019.
Royal LePage 2023 Market
Survey Forecast Table:
rlp.ca/table_2023forecast
Royal
LePage 2023 Quarterly Forecast Table:
rlp.ca/table_2023quarterlyforecast
Greater
Vancouver
In Greater Vancouver, the
aggregate price of a home in the fourth quarter of 2023 is forecast
to decrease 1.0 per cent year-over-year to $1,216,611. During the same period, the median
price of a single-family detached property is expected to decline
2.0 per cent to $1,644,538, while the
median price of a condominium is forecast to increase 1.0 per cent
to $747,299.
"Although many buyers are still sitting on the sidelines,
activity levels are showing signs of a return to seasonal norms in
Greater Vancouver. Attractive
properties in sought-after neighbourhoods that are priced properly
continue to sell quickly," said Randy
Ryalls, managing broker, Royal LePage Sterling Realty. "With
supply still well below what is required for the market to be
considered balanced, I expect we will begin to see prices stabilize
in the spring and summer, when some sidelined buyers return to the
market."
Ryalls added that with limited move-up inventory available, many
sellers are hesitant to list their properties.
"The supply shortage is a self-fulfilling cycle. Sellers won't
list their home if they cannot find another property to purchase.
Despite weakened demand in the second half of this year, the lack
of available inventory has kept prices in the region from declining
further. And, if activity picks up in the new year as expected, it
will not take long for tight competition to challenge buyers once
again."
Royal LePage 2023 Market
Survey Forecast Table:
rlp.ca/table_2023forecast
Royal
LePage 2023 Quarterly Forecast Table:
rlp.ca/table_2023quarterlyforecast
Ottawa
In Ottawa, the aggregate price
of a home in the fourth quarter of 2023 is forecast to increase 2.0
per cent year-over-year to $739,602.
During the same period, the median price of a single-family
detached property is expected to rise 1.0 per cent to $850,117, while the median price of a condominium
is forecast to increase 2.0 per cent to $378,114.
"We are anticipating moderate home price growth in the
Ottawa market by the end of 2023,"
said John Rogan, broker of record,
Royal LePage Performance Realty. "Condominiums will likely see
greater price appreciation than other property types, including in
the single-family detached segment, as higher borrowing costs will
continue to limit buyers' purchasing power and push them to the
lower end of the market."
Rogan added that declining sales in the city in the second half
of 2022 are indicative of what is likely to be a slow start to the
new year. Presently, local housing activity has been largely
motivated by buyers and sellers who are forced to move, including
those relocating for work.
"Interest rates will continue to significantly impact home
prices in 2023. If interest rates stop increasing, or even decline
next year, we could see a spike in home prices and a resurgence of
buyer demand from those who have been waiting on the sidelines,"
added Rogan. "However, sales would increase gradually, as depleted
inventory levels are unlikely to be replenished quickly enough to
keep up with renewed purchaser demand."
Royal LePage 2023 Market
Survey Forecast Table:
rlp.ca/table_2023forecast
Royal
LePage 2023 Quarterly Forecast Table:
rlp.ca/table_2023quarterlyforecast
Calgary
In Calgary, the aggregate price
of a home in the fourth quarter of 2023 is forecast to increase 1.5
per cent year-over-year to $612,451.
During the same period, the median price of a single-family
detached property is expected to rise 1.0 per cent to $701,142, while the median price of a condominium
is forecast to increase 2.5 per cent to $239,543.
"Price declines in Calgary's
real estate market are unlikely next year. Unlike Canada's major urban centres, which saw steep
increases during the pandemic boom followed by rapid declines over
the last six months, the Calgary
market has experienced less drastic swings," said Corinne Lyall, broker and owner, Royal LePage
Benchmark. "I expect we will continue to see moderate price growth
in the entry-level market, particularly in the condominium segment,
which remains very active and has recorded double-digit sales
growth this year. This segment will lead Calgary's price growth in 2023."
Lyall noted that Calgary
continues to see demand from out-of-province buyers, particularly
first-time buyers from Ontario who
are seeking affordable housing options in a major city setting. In
addition, condominiums are popular among out-of-province investors.
A lack of available inventory, especially in the single-family
detached segment, remains a challenge for buyers and continues to
put upward pressure on prices, particularly in the lower end of the
market.
"Buyer demand has remained consistent, and I anticipate
Calgary's real estate market will
continue to see a steady pace of activity. There are many buyers
hovering on the sidelines, waiting for the right product to hit the
market," said Lyall. "I expect activity will remain strong
throughout the winter, with a normal seasonal slowdown in December
and January before picking back up in the spring."
Royal LePage 2023 Market
Survey Forecast Table:
rlp.ca/table_2023forecast
Royal
LePage 2023 Quarterly Forecast Table:
rlp.ca/table_2023quarterlyforecast
Edmonton
In Edmonton, the aggregate
price of a home in the fourth quarter of 2023 is forecast to
increase 1.0 per cent year-over-year to $442,683. During the same period, the median
price of a single-family detached property is expected to rise 2.0
per cent to $491,436, while the
median price of a condominium is forecast to decrease 1.5 per cent
to $198,281.
"Edmonton's housing market
continues to experience a shortage of inventory compared to
pre-pandemic levels, which is helping to keep home prices in check
and the overall market balanced," said Tom
Shearer, broker and owner, Royal LePage Noralta Real Estate.
"As home buying budgets continue to shrink due to the rising cost
of living and higher lending rates, we expect that sales activity
will remain relatively flat in 2023. As a result, we are
anticipating near level price growth at the end of next year, with
a majority of price appreciation expected to occur in the highly
sought-after single-family detached segment."
Shearer noted that many buyers from outside of Alberta and elsewhere in the province continue
to enter the city's housing market. Since the beginning of
February, demand has been strong from Ontario and British
Columbia buyers looking to relocate to Edmonton, due to its relative affordability
and healthy job market.
"Continued strong interprovincial demand will help to keep
Edmonton's market healthy and
balanced at the start of the new year and through the spring. I
expect a return to normal seasonal trends next year, with increased
activity in the summer and a slight pullback through the fall,"
said Shearer.
Royal LePage 2023 Market
Survey Forecast Table:
rlp.ca/table_2023forecast
Royal
LePage 2023 Quarterly Forecast Table:
rlp.ca/table_2023quarterlyforecast
Halifax
In Halifax, the aggregate price
of a home in the fourth quarter of 2023 is forecast to increase 0.5
per cent year-over-year to $479,285.
During the same period, the median price of a single-family
detached property is expected to rise 0.5 per cent to $544,610, while the median price of a condominium
is forecast to increase 1.5 per cent to $407,015.
"I expect that home price growth in Halifax will be virtually flat in 2023. With
interest rates expected to stabilize in the early part of next
year, demand is likely to pick up again in the spring, after sales
volumes reached a two-decade low this year," said Matt Honsberger, broker and owner, Royal LePage
Atlantic. "Buyers have been sitting on the sidelines waiting for
prices to reach their bottom, and sellers have been holding back
until interest rates stop rising and buyers come back to the
market."
Honsberger noted that inventory remains extremely low in the
region, and without a significant boost in supply, the anticipated
increase in demand will put upward pressure on prices next
year.
"While real estate activity in 2023 is unlikely to reach the
exuberant levels recorded in the first half of this year,
Halifax's population continues to
grow and attract buyers from across Canada and abroad. I anticipate that we will
see a return to more normal seasonal trends next year."
Royal LePage 2023 Market
Survey Forecast Table:
rlp.ca/table_2023forecast
Royal
LePage 2023 Quarterly Forecast Table:
rlp.ca/table_2023quarterlyforecast
Winnipeg
In Winnipeg, the aggregate
price of a home in the fourth quarter of 2023 is forecast to
decrease 1.0 per cent year-over-year to $368,181. During the same period, the median
price of a single-family detached property is expected to rise 1.0
per cent to $410,565, while the
median price of a condominium is forecast to decrease 3.0 per cent
to $243,082.
"Winnipeg's housing market
activity has been more reflective of pre-pandemic norms lately,
signaling that the 2023 market should return to seasonal trends. I
expect to see typical winter activity levels in the coming months,
followed by a boost in momentum heading into the spring," said
Michael Froese, broker and manager,
Royal LePage Prime Real Estate. "I expect annual sales activity
will remain below 2022 levels next year, as rising everyday
household expenses constrain buyer budgets and limit their
purchasing power."
Froese added that housing supply levels remain low compared to
historical norms, but expects to see an improvement in the new year
as ongoing supply chain challenges are remedied and housing starts
pick up across the province.
"Demand for single-family homes will continue to drive the
majority of activity in the market. Most buyers still prefer a
detached home, but with inventory levels well below the
five-year average, condo prices are not expected to decline
significantly. Overall, I believe we are moving toward a more
healthy and balanced market next year, provided interest rates
stabilize soon," said Froese.
Royal LePage 2023 Market
Survey Forecast Table:
rlp.ca/table_2023forecast
Royal
LePage 2023 Quarterly Forecast Table:
rlp.ca/table_2023quarterlyforecast
Regina
In Regina, the aggregate price
of a home in the fourth quarter of 2023 is forecast to decrease 1.5
per cent year-over-year to $361,495.
During the same period, the median price of a single-family
detached property is expected to decline 2.0 per cent to
$389,648, while the median price of a
condominium is forecast to increase 1.0 per cent to $221,796.
"Many homebuyers are adjusting to the new realities of higher
mortgage rates, and have reduced their buying budgets as a result.
Any price appreciation we see next year will be in the condominium
segment and the lower end of the market, as some buyers have been
priced out of the single-family segment," said Mike Duggleby, broker and owner, Royal LePage
Regina Realty.
Duggleby noted that the recovery is not likely to roll out
evenly, with investors scooping up lower priced properties before
prices begin to rise again.
"Activity has certainly slowed compared to the historical highs
seen during the pandemic boom. I expect we'll see a return to a
normal seasonal slowdown in the winter months before picking up
again in the spring, although it will not be as vibrant as we've
seen the last two years."
There has been a significant increase in foreclosures in
Regina this year, and Duggleby
expects the trend will continue next year, as overleveraged
homeowners see their historically-low fixed-rate mortgages come up
for renewal.
Royal LePage 2023 Market
Survey Forecast Table:
rlp.ca/table_2023forecast
Royal
LePage 2023 Quarterly Forecast Table:
rlp.ca/table_2023quarterlyforecast
Royal LePage Royalty-Free Media
Assets:
Royal LePage's media room
contains royalty-free assets, such as images and b-roll, that are
free for media use.
- Media room: rlp.ca/mediaroom
- Royalty-free assets: rlp.ca/media-assets
About the Royal LePage Market
Survey Forecast
The Royal LePage Market Survey Forecast provides year-over-year
and quarter-over-quarter price expectations for Canada's nine largest markets. Housing values
are based on the Royal LePage National House Price Composite,
produced through the use of company data in addition to data and
analytics from its sister company, RPS Real Property Solutions, the
trusted source for residential real estate intelligence and
analytics in Canada. Commentary on
housing and forecast values are provided by Royal LePage residential real estate experts,
based on trend analysis and market knowledge.
About Royal LePage
Serving Canadians since 1913, Royal
LePage is the country's leading provider of services to real
estate brokerages, with a network of approximately 20,000 real
estate professionals in over 600 locations nationwide. Royal LePage is the only Canadian real estate
company to have its own charitable foundation, the Royal LePage
Shelter Foundation, dedicated to supporting women's and children's
shelters and educational programs aimed at ending domestic
violence. Royal LePage is a
Bridgemarq Real Estate Services Inc. company, a TSX-listed
corporation trading under the symbol TSX:BRE. For more information,
please visit www.royallepage.ca.
SOURCE Royal LePage Real Estate Services