According to the Royal LePage House Price Survey released today, the aggregate price of a home in Canada increased 1.6% year over year to $815,500 in the third quarter of 2024. On a quarter-over-quarter basis, however, the national aggregate home price decreased 1.1%, following sluggish activity in most – though not all – markets through the summer months. Coast to coast, sales volumes began to pick up in September, and more than one third (38%) of regional markets covered in the report recorded positive aggregate price gains in the third quarter over the previous quarter.
“Despite three cuts to the Bank of Canada’s overnight lending rate, buyer demand nationally remains weak, particularly among two key groups: first-time homebuyers and small investors,” said Phil Soper, president and chief executive officer, Royal LePage. “First-time buyers, who are more sensitive to interest rates, are adopting a wait-and-see attitude. With home prices essentially flat and interest rates steadily declining, they perceive no penalty in postponing their purchase.
“Similarly, small investors who typically buy condominiums to rent out and supply much of Canada’s rental housing, are also hesitant. Elevated rates have made the financials unworkable, with carrying costs surpassing rental income. While historically some landlords accept negative cash flow temporarily when properties are appreciating in value, the current flat prices do not justify many investments,” said Soper. “We believe that both groups will re-enter the market in significant numbers as property values begin to rise again. With further rate cuts from the Bank of Canada likely this year, we anticipate prices will appreciate more quickly, eliminating the advantages of waiting for first-time buyers and making calculations more favourable for investors.
“Total listings on royallepage.ca, Canada’s most visited real estate company website, reached a historical high in September, up 19% year over year,” continued Soper. “Clearly, existing homeowners are ready to move. And, all buyers have more choice and less competition than is typical in our growing nation. The market recovery is underway and will continue to gain strength into 2025.”
The Royal LePage National House Price Composite is compiled from proprietary property data nationally and regionally in 64 of the nation’s largest real estate markets. When broken out by housing type, the national median price of a single-family detached home increased 2.0% year over year to $850,400, while the median price of a condominium increased 0.5% year over year to $590,200. On a quarter-over-quarter basis, the median price of a single-family detached home decreased modestly by 1.2%, while the median price of a condominium decreased 1.1%. Price data, which includes both resale and new build, is provided by RPS Real Property Solutions, a leading Canadian real estate valuation company.
“With rates dropping, we see positive signs for sidelined buyers. As confidence grows and buyers anticipate rising prices, we expect a significant increase in activity. Given the building demand – both organic and from immigration – the 2025 spring market may start as early as late January or early February, a pull-ahead phenomenon we’ve seen in previous market turnarounds. The stage is set for a busy year ahead.”
New lending rules will ease affordability challenges and unlock opportunity for homebuyers
In recent weeks, a series of new regulations impacting mortgages and lending practices in Canada were announced. Starting on December 15th, all purchasers of new construction homes and all first-time buyers will be able to acquire an insured mortgage with a 30-year amortization period. In addition, the federal government announced an increase to the insured mortgage cap from $1 million to $1.5 million.
Following the announcement of these changes, the Office of the Superintendent of Financial Institutions (OSFI) revealed that, beginning November 21st, it will eliminate the mortgage stress test for uninsured borrowers who plan to switch lenders upon renewing their loan, provided they maintain the same amortization schedule and loan amount.
“These changes will have more impact on the early 2025 market than many anticipate. Expect a material bump in activity,” said Soper. “In addition to assisting first-time buyers, raising the cap on insured mortgages expands opportunities for move-up buyers in higher-priced markets, thereby freeing up inventory for new homeowners entering the market.
“While these updated mortgage rules are a timely strategy to alleviate some affordability pressure, they are not a silver bullet for the fundamental issue that persists: Canada urgently needs more housing supply. Continued efforts to boost inventory are essential for fostering a sustainable and healthy real estate market for future generations.”
According to a recent Royal LePage survey, conducted by Hill & Knowlton, 84%of Canadians belonging to the adult generation Z and young millennial cohort – those aged 18 to 38 – believe that home ownership is a worthwhile investment. Among those who do not currently own a home, 75% say they are planning to purchase a property as a primary residence; nearly half (40%) of them say they plan to do so within the next five to ten years.
In the report, Soper noted: “The youngest cohort of homebuyers in Canada have no shortage of barriers on their path to ownership. Though the cost of borrowing has begun to come down, chronic supply shortages have kept housing prices from dropping, even as demand softened under the weight of high interest rates. Despite these hurdles, the next generation of homebuyers remains committed to their pursuit of owning real estate, and are remarkably optimistic that they can make their dream a reality.”
According to The Conference Board of Canada’s latest report,[5] consumer confidence is on the rise. In September, the Index of Consumer Confidence increased 3.3 per cent over the previous month, reaching its highest level in over a year. Furthermore, the percentage of Canadians who believe now is a good time to make a major purchase rose.
Loans renewing at higher rates
Even as interest rates soften, millions of Canadians who secured fixed-rate mortgages in the period of ultra-low borrowing conditions prior to March of 2022, have seen their monthly carrying costs increase upon renewal, or they will soon.
“The Bank of Canada will not be able to cut rates quickly or deeply enough to take away all of the renewal pain for those still on pandemic-era, low-rate mortgages,” noted Soper. “While a small percentage of these families may be forced to relocate to more affordable regions or to a less expensive property, the majority of Canadians are well-positioned to weather this situation, thanks to the strict lending practices and safeguards implemented by our highly-regulated financial institutions.”
Currently, the Bank of Canada’s key lending rate sits at 4.25%. The central bank’s governing council has hinted at further rate cuts to come, noting that they are working to balance the risk of stimulating economic growth – specifically inflating shelter prices – with the possibility of weakening labour markets. The next interest rate announcement is scheduled for October 23rd.
Regional trends vary from coast to coast
As was true of the pandemic-era real estate boom, the recovery is not unravelling evenly. Just as two of Canada’s largest and most expensive markets reached higher highs and lower lows between 2020 and 2023, Toronto and Vancouver are now lagging behind in the recovery as well. Meanwhile, regional markets in the province of Quebec and in the Prairies have shown greater resilience through the period of elevated interest rates.
“It’s taking longer for activity and home prices to bounce back in major cities where affordability challenges are greatest. Following subdued activity this spring and summer in the Greater Toronto Area, we’ve begun to see a turnaround in the fall market with an increase in buyer demand and a boost in sales. Greater Vancouver has yet to catch up,” noted Soper.
“The higher cost of living in these regions continues to result in residents migrating to other parts of the country, offset by newcomers who continually choose these cities upon arrival in Canada. Alberta continues to record population growth – made up in large part by inter-provincial migration from Ontario and British Columbia – while gains in Atlantic Canada have stalled since the pandemic rush to the Maritimes.”
Forecast
Royal LePage is forecasting that the aggregate price of a home in Canada will increase 5.5% in the fourth quarter of 2024, compared to the same quarter last year. The previously upgraded forecast has been revised down to reflect current market conditions, specifically in the greater regions of Toronto and Vancouver, which recorded lower-than-anticipated activity through the spring and summer months.
“The market recovery, albeit uneven across the country, is well underway in a majority of markets. While we may not see significant price appreciation in the typically-slower fourth quarter of this year, we believe our previous forecast will come to fruition in the anticipated early spring market of 2025.”
Royal LePage House Price Survey Chart: rlp.ca/house-prices-Q3-2024
Royal LePage Forecast Chart: rlp.ca/market-forecast-Q3-2024
REGIONAL SUMMARIES
Greater Toronto Area
The aggregate price of a home in the Greater Toronto Area (GTA) increased 0.7% year over year to $1,155,800 in the third quarter of 2024. On a quarterly basis, however, the aggregate price of a home in the GTA decreased 2.9%.
Broken out by housing type, the median price of a single-family detached home increased 1.6% year over year to $1,421,000 in the third quarter of 2024, while the median price of a condominium dipped 0.4% to $722,200 during the same period.
“Activity in the third quarter was muted overall. The slower-than-expected spring market gave way to a soft start to fall in Toronto and the GTA, although the tide began to turn in mid-September. While inventory levels continued to rise and the average days on market sat higher than usual, prices came down only slightly in parts of the region in Q3,” said Karen Yolevski, chief operating officer, Royal LePage Real Estate Services Ltd. “This indicates that while sellers have come off the sidelines faster than buyers, they’re not desperate to sell.”
In the city of Toronto, the aggregate price of a home decreased 2.3% year over year to $1,128,900 in the third quarter of 2024. During the same period, the median price of a single-family detached home declined 1.3% year over year to $1,672,400, while the median price of a condominium decreased 3.2% to $682,800.
“Trends in Toronto’s condo market have been marching to a different beat, compared to other property segments of late. A wave of new units has hit the market amid a near-record number of completions this year. And, with some investors offloading rental units that have become too expensive to carry, prices have softened. This could spell opportunity for first-time buyers, with borrowing rates on the decline and new 30-year amortization legislation set to come into effect that will ease the burden of monthly carrying costs,” noted Yolevski.
“Looking ahead, as we move further into the fall market and lending rates continue to ease, sales activity and prices will start to edge upward modestly, and housing inventory will get consumed. I believe Toronto, along with most of the country, is set to see a brisk spring housing market in 2025.”
Royal LePage is forecasting that the aggregate price of a home in the Greater Toronto Area will increase 6.0% in the fourth quarter of 2024, compared to the same quarter last year. The previous forecast has been revised downward to reflect current market conditions.
Royal LePage House Price Survey Chart: rlp.ca/house-prices-Q3-2024
Royal LePage Forecast Chart: rlp.ca/market-forecast-Q3-2024
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