Canada's 'sluggish' housing market in recovery mode following interest rate cuts, Royal LePage forecast predicts
Royal LePage’s latest housing market forecast predicts a real estate rebound that will see Canada’s “sluggish” markets in recovery mode by spring following a third straight interest rate cut.
The real estate company released its third quarter home price update and market forecast for the year on Thursday, which found that the national aggregate home price increased 1.6 per cent year-over-year to $815,500 in the third quarter of 2024 and decreased 1.1 per cent from the previous quarter.
The 1.1 per cent decrease is due to the sluggish activity in most markets through the summer months, but the report noted that sales volumes began to pick up in September.
“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 at 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.”
“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.”
“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.”
In its report, Royal LePage says its national house price composite is compiled from proprietary property data nationally and regionally in 64 of the country’s largest real estate markets.
Its data for the third quarter in 2024 found that the median price of a single-family detached home increased two per cent year-over-year to $850,400, while the median price of a condominium increased 0.5 per cent to $590,200.
On a quarter-over-quarter basis, the median price of a single-family detached home decreased by 1.2 per cent, while the median price of a condominium decreased 1.1 per cent, the data found.
“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,” Soper said. “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.”
Greater Montreal saw the aggregate home price increase in the city by 5.2 per cent year-over-year in the third quarter of 2024, while the greater Toronto and Vancouver markets remained flat, and rose a “modest” 0.7 per cent and 0.5 per cent respectively, the report stated.
The report stated that the aggregate price of a home in the Greater Toronto Area increased 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 per cent.
“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 at 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.”
Royal LePage said in its report that it is forecasting that the aggregate price of a home in the Greater Toronto Area will increase six per cent in the fourth quarter of 2024, compared to the same quarter last year.
In the City of Toronto, the aggregate price of a home decreased 2.3 per cent 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 per cent year over year to $1,672,400, while the median price of a condominium decreased 3.2 per cent 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,” Yolevski said. “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.”
“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 stated in its report that home prices nationally are expected to remain stable through Q4 and predicts “a pull-ahead of the spring market on the expectation of continued easing of lending rates.” It forecasts that the aggregate price of a home in Canada will increase by 5.5 per cent in the fourth quarter of 2024, compared to the same quarter last year.
“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,” Soper said.
Currently, the Bank of Canada’s key lending rate sits at 4.25 per cent, the report stated. The next interest rate announcement is scheduled for Oct. 23.
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