Yahoo Finance ‘Critical tipping point’: Home price forecast rises amid strong start to 2024, says Royal LePage
Royal LePage has hiked its year-end home price forecast, with prices now expected to increase 9 per cent annually in the fourth quarter of 2024, following a stronger-than-expected start to the year.
According to the real estate company’s latest house price survey, the aggregate price of a home in Canada jumped 4.3 per cent on an annual basis in the first quarter of the year to $812,100. Royal LePage president and CEO Phil Soper said the first quarter saw many buyers come off the sidelines, in advance of what they expect will be a more competitive spring market.
“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,” Soper said in a statement.
“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 ... we are rapidly transitioning away from a buyers’ market and back to an environment where the seller has the upper hand.”
Data released on Friday by the Canadian Real Estate Association (CREA) showed that home sales edged up in March, rising 0.5 per cent on a monthly basis and 1.7 per cent compared to the same time last year. CREA said the national average home price increased 2 per cent from last year, hitting $698,530. CREA chair Larry Cerqua said in a news release that "anecdotal evidence from late last month and early April suggests activity is ramping up."
Royal LePage had previously forecast that aggregate home prices in Canada would rise 5.5 per cent in the fourth quarter. It now expects prices to jump 9 per cent, to an aggregate price of $860,555, with Toronto and Montreal expected to see the biggest gains in the fourth quarter, at 10 per cent and 8.5 per cent respectively. Royal LePage calculates aggregate prices using a weighted average of the median value of all housing types.
Many prospective home buyers have sat on the sidelines amid a higher interest rate environment. The Bank of Canada aggressively hiked its benchmark rate starting in March 2022, bringing it to 5 per cent, where it has remained for six consecutive decisions. The central bank opted to hold its key rate steady on Wednesday, but said that a June rate cut is “within the realm of possibilities” provided progress on inflation is sustained.
Soper said once the central bank cuts its benchmark rate, more buyers will enter the Canadian real estate market.
“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,” he said.
Still, Soper says, the primary driver of rising home prices remains a shortage of housing supply.
“While real estate boards across the country are reporting a boost in listings, which is typical as we head into the spring market rush, just about every region from coast to coast remains chronically short of housing supply,” he said.
The Greater Toronto Area (GTA) will see the biggest annual price appreciation in the fourth quarter, according to Royal LePage, with prices increasing 10 per cent, to an aggregate price of $1.24 million.
Montreal is expected to see prices increase 8.5 per cent in the fourth quarter, bringing aggregate home prices to $614,987. In Vancouver, Royal LePage predicts prices will rise a further 5.5 per cent, bringing the aggregate price of a home to $1.29 million in the fourth quarter of the year. Calgary and Quebec City are expected to see home prices rise 8 per cent in Q4, with aggregate prices rising to $716,580 and $388,800, respectively.
Higher interest rates, strained supply and strong demand from surging population growth has resulted in a housing affordability crisis. It has been particularly difficult for first-time homebuyers to enter the Canadian housing market. In a bid to help first-time buyers afford a home, this week Finance Minister Chrystia Freeland announced that the federal government will allow 30-year amortization periods on insured mortgages for first-time homebuyers buying newly built homes. The government will also raise the amount of money prospective first-time homebuyers can with withdraw from their RRSPs without penalty, from $35,000 to $60,000.
Alicja Siekierska is a senior reporter at Yahoo Finance Canada. Follow her on Twitter @alicjawithaj.
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