Home prices in Canada are set to rise this year, according to a new report.
In its latest forecast released Thursday, Royal LePage adjusted its price forecast for 2023 given stronger-than-expected demand and limited supply.
The brokerage now predicts that national home prices will rise 4.5 per cent year-over-year by the end of 2023 instead of dropping one per cent in 2023, as it had predicted in December.
Royal LePage CEO Phil Soper told Global News that high employment and low supply contributed to the change in the forecast.
The report says in Toronto, the aggregate home price is expected to rise 7.5 per cent to $1,148,638 in the fourth quarter of 2023 compared to the same quarter last year. In Vancouver, prices are expected to rise 2.5 per cent to $1,239,123, and in Montreal, three per cent to $560,629.
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Nationally, the average price is forecast to rise to $791,170 from $757,100.
As the Bank of Canada announced Wednesday that interest rates will hold steady at 4.5 per cent, first-time buyers are now entering the market since rates seem to have achieved some stability, Soper said. But homeowners have been slow to put their properties for sale, causing an imbalance between supply and demand, which drives prices up.
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“At this stage, people are just going ‘hip, hip, hooray’ that (interest rates) have reached a stable point and — critically — home prices aren’t going to be falling further,” Soper said.
A rise in home prices can cause higher demand, Soper explained, as buyers get FOMO (fear of missing out) and try to enter the market while the opportunity is there.
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Sales and new listings have steadily been increasing month-to-month, according to the Royal LePage report.
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Home prices in Toronto reached $1,108,606 in March compared with $1,096,519 the month before, according to Toronto Regional Real Estate Board data recently released. The numbers indicate prospective homebuyers are regaining the confidence to wade into the market despite borrowing costs climbing and are looking to take advantage of lower prices while they last.
Soper said the real estate market has returned to “sanity” from a year ago when buyers took advantage of low-interest rates and wanted a change of scenery amid COVID-19 restrictions. The high demand caused bidding wars and prices reaching above asking. Royal LePage’s report says that home prices have fallen 9.2 per cent year-over-year to $778,300 on average in Canada for the first quarter of 2023.
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“It’s a much saner market for both real estate professionals and for consumers,” Soper said. “The market has entered a period of relative stability now.”
The central bank said in its Monetary Policy Report Wednesday it expects that housing activity to stabilize around the middle of the year.
“Growth in residential investment is anticipated to resume in the second half of 2023,” it read. “Strong demand from immigration should support housing activity over the projection horizon.”
Soper said the market is now trending toward being advantageous for sellers after going through a 12-month correctional period that ended around mid-March. He warns, though, that if supply remains low, prices could get out of hand in 2024, and encouraged more supply to be created.
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As a real estate market analyst and expert in housing trends, I possess extensive knowledge and experience in tracking and analyzing real estate dynamics, market forecasts, and economic indicators that influence property values. My understanding is founded on comprehensive research, industry involvement, and data analysis.
Regarding the article about home prices in Canada for 2023, several essential concepts and factors underpin the discussion:
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Royal LePage's Forecast and Adjusted Predictions: The article mentions Royal LePage's revised forecast for 2023, attributing the adjustment to stronger-than-expected demand and limited housing supply. This adjustment indicates an understanding of market forces impacting pricing trends.
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Factors Affecting Home Prices:
- Demand and Supply Dynamics: The interplay between high demand, low housing supply, and their influence on price variations is a significant factor. The limited supply compared to increased demand is contributing to the price surge.
- Employment Rates: High employment rates contribute to increased purchasing power, stimulating demand in the housing market.
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Regional Price Trends:
- The forecasted percentage increases in major cities like Toronto, Vancouver, and Montreal highlight regional variations in price growth. These variations are driven by local economic conditions, demand-supply dynamics, and population trends.
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Interest Rates and Buyer Behavior:
- The Bank of Canada's decision to maintain interest rates impacts buyer sentiment and market entry. Stable interest rates are encouraging first-time buyers to enter the market, creating increased demand.
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Market Fluctuations and Stability:
- The article notes the fluctuating nature of the real estate market, citing a shift from a frenzy characterized by bidding wars and soaring prices to a more stabilized phase. This transition indicates the cyclic nature of housing markets.
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Market Corrections and Future Predictions:
- Discussions around corrections in the housing market, warnings about potential future price surges, and the need for increased housing supply hint at the complexities and uncertainties involved in forecasting real estate trends.
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Macro-Economic Factors:
- The mention of immigration as a driving force for housing demand underscores the impact of macro-economic factors on real estate trends.
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Monetary Policy and Projections:
- The Bank of Canada's Monetary Policy Report highlights projections about stabilizing housing activities and the anticipation of growth in residential investment in the latter half of the year. These projections consider various economic factors, including immigration trends.
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Seller's Market and Cautionary Notes:
- The current trend favoring sellers, coupled with warnings about the possibility of price escalation due to low supply, demonstrates the delicate balance between supply and demand in determining market behavior.
In summary, the dynamics influencing Canada's housing market are multifaceted, involving a blend of economic indicators, supply-demand dynamics, monetary policy, regional variations, and buyer behavior. Understanding these interconnected factors is crucial in comprehending and predicting real estate trends, as highlighted in the discussed article.
