Yahoo Finance Canada real estate: Home prices up 4.3% in Q4, with higher prices expected in 2024
A new Royal LePage survey says national aggregate home prices in Canada increased 4.3 per cent in the fourth quarter of 2023, and that prices are expected to continue to rise in 2024.
According to the Royal LePage House Price survey released on Monday, the aggregative price of a home in Canada increased 4.3 per cent year over year to $789,500. Royal LePage calculates aggregate prices using a weighted average of the median value of all housing types. On a quarterly basis, prices dropped 1.7 per cent, as higher interest rates continue to dampen demand in the housing market.
The increase is below what Royal LePage had predicted earlier this year. It revised its fourth-quarter guidance in October in the wake of softer activity in the market, predicting that the aggregate price of a home would rise 7 per cent in the fourth quarter. Prices have not fully recovered from the post-pandemic correction, now 7.9 per cent below the peak reached in the first quarter of 2022. However, home prices are well above pre-pandemic levels, up 18.7 per cent compared to the fourth quarter of 2020, and 22.2 per cent compared to 2019.
Royal LePage chief executive Phil Soper said: "I think the general public would be surprised to see how well the housing market has stood up during a post-pandemic correction."
"It's quite remarkable that we could have the volume of sales drop by some 20 per cent, and yet home prices have stayed essentially flat. Typically, when demand falls off like that, prices would soften considerably," Soper said in an interview with Yahoo Finance Canada.
Royal LePage sees a further recovery on the horizon in 2024, with the Bank of Canada expected to start cutting its key interest rate this year. The central bank aggressively hiked rates in the wake of high inflation over the last two years, bringing its benchmark rate to 5 per cent, the level it has remained at for three consecutive decisions. Economists widely expect that the central bank will soon begin cutting rates as the economy continues to show signs of weakening.
But Soper says the housing market recovery won't require a steep decline in interest rates in order to kick off, as buyers look for signs of stability in the market. He notes that a small uptick in prices or indication that the market has shifted direction could be enough to trigger a recovery.
"We believe it will happen this spring, with the bottom happening towards the end of the first quarter as the spring market rolls into life, and then prices will start to edge up modestly through the second quarter," Soper said, adding that Royal LePage expects the Bank of Canada to start cutting rates mid-year.
"When that happens, we believe there will be a sharper uptick in both volume and home prices, with prices finishing the year up 5.5 per cent over where they were at the end of 2023."
Royal LePage expects the aggregate price of a home in Canada to be up 3.3 per cent annually in the first quarter, up 0.2 per cent annually in the second quarter, up 3.3 per cent annually in the third before climbing 5.5 per cent annually by the end of the year. That will essentially return prices back to their pandemic peak, Royal LePage says.
Alicja Siekierska is a senior reporter at Yahoo Finance Canada. Follow her on Twitter @alicjawithaj.
Download the Yahoo Finance app, available for Apple and Android.
