Royal LePage, a prominent real estate corporation in Canada, recently issued a report that conveys the resilience of home buyers even as borrowing rates ascend. The report also points to potential market stability following a period of turbulence induced by the pandemic.
The House Price Survey report, released by Royal LePage on Thursday, indicates signs of a recovery from the volatility experienced during the pandemic.
Nevertheless, the report accentuates the persisting housing shortage plaguing the country, recommending governmental interventions to catalyze additional development, especially in the affordable housing sector.
The report discloses that the average cost of a home in Canada showed negligible change from last year in 2023’s second quarter, dipping by a mere 0.7 per cent to $809,200.
The barely perceptible drop in the home price average has led real estate pundits to conjecture that the market could be nearing recuperation from the post-pandemic market correction of 2022. Interestingly, the second quarter of 2023 showed a four per cent increase compared to the preceding quarter.
The average cost of a home now rests 5.6 per cent below the peak pricing experienced in 2022’s first quarter.
The report projects a stable price range for the next six months, followed by an 8.5 per cent surge in the last quarter of 2023 relative to the final quarter of 2022.
“Despite the decision of the central bank to escalate interest rates again, many buyers remain undeterred. Demand remains high, especially among those who have locked in their rates,” said Phil Soper, President and CEO of Royal LePage, during a press statement. “Prospective homeowners who are resolved to acquire a property this year have braced themselves for higher upfront carrying costs, rationally deducing that rates have likely peaked and will soon become more manageable.”
Soper added that those who bought homes during the tail end of the pandemic-propelled real estate surge saw their home values dip during the subsequent market correction. However, he suggested that the prices have now steadied enough for those homeowners to potentially resell without incurring considerable losses.
According to Soper, “We are nearing the crucial juncture where individuals who bought at the peak could break even if they sold their homes now.”
The countrywide median price for a detached single-family home has declined by two per cent to $841,900 compared to the previous year, while the median price for a condominium dipped by just 0.4 per cent to $586,900. These prices mark a 4.1 per cent and 2.7 per cent rise compared to 2023’s first quarter.
Royal LePage bases its data on property information from 62 of Canada’s most substantial real estate markets. RPS Real Property Solutions, a sister company specializing in real estate valuation, furnishes the pricing data, which encompasses resale and new build homes.
In Greater Toronto Area (GTA), the second quarter of 2023 saw a slight increase in home prices. However, the current prices remain seven per cent below the peak of 2022. Greater Vancouver, Canada’s priciest market, mirrors this trend with prices resting 6.9 per cent below the 2022 peak.
The report suggests a potential increase of 11 per cent by the end of the year in the GTA, where the average home price currently stands around $1,180,400. In Vancouver, the average home price in the second quarter was $1,274,000.
Randy Ryalls, General Manager at Royal LePage Sterling Realty, noted in the release that “although the market is reverting to regular seasonal patterns, there is palpable anxiety around interest rates. Buyers with secured loans at the current rate are rushing to make purchases. However, an additional interest rate increase could deter prospective buyers, leading some to withdraw from the market entirely or even compel them to sell if mortgage renewals become unaffordable.”
Among the cities highlighted in the report, Edmonton may experience the smallest hike in housing prices during 2023’s fourth quarter, with a predicted increase of only four per cent by the year’s end.
Tom Shearer, Broker and Owner at Royal LePage Noralta Real Estate, stated in the release, “Given the incremental and minor nature of recent interest rate hikes, I don’t anticipate any further increases this year significantly impacting home prices. We’re likely to see 2023 wrapping up with almost flat price growth.”
Roughly one-third of the regions covered in the report witnessed an uptick in house prices in the second quarter of 2023, while four regions reported decreases.
“Across Canada, the pressure on prices is mounting due to a resurgence in pre-pandemic levels of demand and an enduring shortage of supply,” Soper observed.
Soper also noted the hesitation among sellers to list, leading to a scarcity of housing options and rising rental costs. This situation is particularly dire for younger generations struggling to accumulate savings for a down payment, which further compounds the housing market woes.
He emphasized the need for government support to promote affordable rental housing development, particularly in cities like Toronto and Vancouver, where financial self-sufficiency is becoming increasingly challenging for young adults.
Despite strong buyer interest even amidst rising interest rates, Soper acknowledged that some have been “pushed to the sidelines indefinitely.”
He added, “Uncertain economic conditions have prompted some potential sellers to reconsider their plans. The fear that they may struggle to secure their desired upscale home in the present tight market is a serious worry. The shortage of sellers leads to fewer listings, further aggravating our chronic inventory deficit. Accessibility to affordable housing in Canada will continue to be a pressing social issue.”