Where Home Prices Will Rise The Most In Canada
Housing prices across Canada are expected to keep climbing as we head into 2024. In fact, they’re set to increase significantly.
According to a report released Thursday by Royal LePage, Canadians can expect to see a 5.5% increase in prices towards the end of next year — compared with prices in 2023.
The national average for a typical home will be $843,684 in 2024.
Regionally, though, the numbers are all over the board.
Calgary climbs as Vancouver remains priciest
The Greater Vancouver Area is expected to lead the country in average home prices, with costs for a typical property estimated to be $1,281,732.
Calgary, however, will see the highest year-over-year spike with a forecasted increase of 8% year-over-year — 2.5% higher than the national forecasted average.
“Canada’s real estate market has been on a roller coaster ride for the last four years. A global pandemic briefly brought market activity to a grinding halt in early 2020, followed by a rapid, widespread spike in demand and price appreciation as Canadians sought safety and greater living space in their homes among a world of uncertainty,” Phil Soper, president and CEO of Royal LePage said in a statement.
“Markets take time to adjust. We see a move toward typical home sale transaction levels in 2024, and as the year progresses, appreciating house prices.”
Home prices are expected to rise next year in all major markets across the country.
The Greater Vancouver Area is expected to see a much lower increase than the majority of other Canadian cities, with a predicted growth of 3% year-over-year.
Similarly, in the Greater Toronto Area, the cost of a home is expected to soar above the national average to $1,198,012, which is 6% higher than it is currently.
On the other side of the scale, Edmonton still ranks as one of the country’s most affordable markets for a home, with prices for a typical home expected to come to $443,248 by the end of next year.
Despite the relative affordability, that number is still a 4% increase from the end of 2023.
The steady increase in prices can be attributed to a number of things, according to Royal LePage.
Sales activity in most of Canada’s major real estate markets has been on the decline while inventory levels have gradually increased.
Also, transactions are down as much as 20% to 30% in some regions, and home prices have only declined modestly during this time due to a drop in demand as potential buyers continue to hold out for lower interest rates.
2024 will be “tipping point” for Canada’s economy
“Looking ahead, we see 2024 as an important tipping point for the national economy as the
“We believe that the ‘great adjustment’ to tolerable, mid-single-digit borrowing costs will have a firm grip on our collective consciousness after only modest rate cuts by the Bank of Canada.”
Royal LePage’s forecast is based on a prediction that the Bank of Canada has concluded its interest rate hike campaign and that the key lending rate will hold steady at 5% through the first half of 2024.
According to them, the central bank is expected to start making modest cuts in late summer or fall of next year, and several major financial institutions have already begun offering discounts on fixed-rate mortgages.
Toronto Real Estate Prices Drop Over $20k As Listings Surge 38% Higher
Greater Toronto real estate is back to an ice cold market, after higher rates killed off speculation. Toronto Regional Real Estate Board (TRREB) data shows the composite benchmark (typical) home price made a sharp drop in October. Fewer sales were a major contributor, but the biggest factor is rising inventory. A lot more sellers are suddenly appearing, and the market isn’t ready to buy at the current price level.
Greater Toronto real estate prices fell again, nearly wiping out any gains over the past year. TRREB’s benchmark price fell 2.1% (-$23,400) to $1,103,600 in October. In the City of Toronto, the benchmark made an even sharper drop—2.3% (-$24,900) to $1,083,700 over the same period. After four consecutive drops, this last sharp one pushes prices back to the lowest level since January 2023.
Compared to last year, annual growth for both the TRREB (+1.42%) and City of Toronto (+0.3%) was minimal. These composites are likely to start printing negative growth without a dramatic shift to the inventory and sales trends.
Greater Toronto residential real estate demand is pudding soft. The annual growth of sales across the board fell 5.8% to 4,646 homes in October. At the same time, new listings have jumped 38% higher to 14,397 listings over the same period. The decline in sales wasn’t substantial by any means, but the uptick to inventory was.
The industry’s sales to new listings ratio (SNLR) is a preferred method to gauge demand. When the ratio is between 40 and 60 percent, the market is considered balanced and priced right for the current level of demand. If the ratio is higher, demand is tight and likely to drive home prices higher. When the ratio is lower, inventory is considered high, and likely to push home prices lower.
The SNLR fell to just 32% in October, meaning the industry expects prices to soften further. In contrast, it was thought that market demand was soft enough to push prices lower when the ratio was 47% last year. Now that the ratio is well into a “buyers’ market,” the downward pressure on prices is stronger.
Falling demand was largely expected as investors began to dominate the market. Since they were buying with leverage on the basis of appreciation, higher rates have suddenly killed investor appeal. Now to restore sales, either prices need to fall back to a level that end users can afford, or investors need to see the return of cheap leverage.
Toronto Home Prices Could Rise By 6% Next Year: Royal LePage Forecast
Toronto’s real estate market is expected to rebound in 2024 after the higher cost of borrowing weighed on sales over much of the past year, according to a market survey forecast by Royal LePage.
The Canadian real estate franchiser is estimating that aggregate home prices will rise six per cent over the course of 2024 to an average of almost $1.2 million. Single-family detached homes are expected to see a seven per cent increase in price, and condominiums in the GTA are expected to rise by five per cent.
The expected price gains in the GTA trail only Calgary, where aggregate homes are expected to increase by eight per cent, single-family detached homes by six per cent and condos by 9.5 per cent.
Canadian homes, on average, are expected to increase by 5.5 per cent in price for aggregate properties, whereas single-family detached homes are expected to see a six per cent increase. Condos will see their average price rise by about 5.5 per cent.
“One of the things that’s going to contribute to the up-tick is that we’re quite far down [in sales],” Phil Sopher, president and CEO of Royal LePage, said during an interview with CP24 on Thursday.
Despite a 30 per cent lull in sales from the average amount this year, demand for housing remains and housing costs continued to rise.
Detached and semi-detached homes, as well as townhouses, have all seen price increases in Toronto and the rest of the GTA from October 2022, ranging from 1.1 to 6.1 per cent. The only exception is condos, which have decreased by 1.2 per cent in price to an average of $708,780 in the region this fall.
Sopher expects prices to remain steady into the first quarter of the New Year before increasing in the second half of 2024 when many economists expect the Bank of Canada to begin cutting interest rates from a 22-year high.
“I think a very small rate cut by the central bank, by the Bank of Canada, will unleash a lot of that pent-up demand that we’ve had a lot of that over the last couple of years, which, by the way, is the longest slow-down in Canadian and Ontario real estate in 25-years. Even the great recession was only 9-months, we’re going to be two-years here. So there’s a lot of pent-up demand,” he said.
A recent decision to hold the interest rate by the Bank of Canada was made last week, following evidence that higher interest rates are helping to bring inflation down.
Sopher says that while prices are expected to increase, if there is not an increase in housing supply, the end of the decade is “where the risk is.”
Last March, the city issued the Housing Action Plan, which aims to meet or surpass the Ford government’s provincial housing target of adding 285,000 new homes in the city within the next 10-years.
This follows a report by the Building Industry and Land Development Association (BILD) and the Federation of Rental-housing Providers of Ontario that suggests the number of renter households in the GTA will rise by 58 per cent over the next decade, adding pressure to the ongoing housing crisis.
“But come 2025, I think we’ll have less,” Sopher said. “[Unless] we make real material changes in supply of homes we have available, and we are at risk of double digit home pricing increases again.”
The average selling price of a Toronto home across all property types peaked at $1,334,062 in February 2022 before dropping to a low of $1,037,542 later that year, according to Toronto Region Real Estate