The national aggregate home price in Canada is forecast to increase 5% in the fourth quarter of 2022, compared to the same time frame in 2021, according to the Royal LePage House Price Survey..It’s a downward revision from Royal LePage's’ previous forecast, after large increases in interest rates by the Bank of Canada, including a 1% increase on July 13, positioning the bank’s rate at 2.5%, ten times higher than in March..On a year-over-year basis, the aggregate price increased 12.1% to $815,000 in the second quarter of 2022, however on a quarter-to-quarter basis, the price decreased 4.9% in the second quarter of 2022 from the record year-over-year highs in the first quarter..This is reflective of softening home prices in markets that saw exceptional price growth during the pandemic. The second quarter of 2022 is the first quarter in more than three years to post a quarter-over-quarter decline in home prices, said Phil Soper, president and CEO of Royal LePage..“Some of the heat that was driving the market cooled during the quarter as rising interest rates coupled with economic uncertainty undermined consumer confidence and pushed buyers to the sidelines,” said Soper. “We have significantly reduced our outlook for 2022, however home prices are still forecast to end the year higher than 2021 and well above pre-pandemic norms.”.“Following record price gains across the country, numerous markets in southern Ontario and parts of Greater Vancouver, specifically those that saw some of the highest price appreciation over the last two years, experienced a second quarter decline.”.“I expect this highly unusual downward movement in home values will be short-lived as the country’s chronic housing shortage has not been resolved.”.Soper said expectations resale home prices will hold their value for the remainder of 2022 are based on continued household formation from peak millennials who are reaching traditional home-buying age, high levels of immigration, a healthy job market and the high construction cost of new homes..“Since 1980, there have only been seven instances of a 3-month decline in resale home prices of 10% or more, with the most recent instance occurring in May, 2022,” he said. “Barring a sharp increase in the inventory of properties for sale in this country, which seems unlikely given our exceptionally low level of unemployment, growing population and miniscule rate of mortgage default, we expect that the second quarter produced most of the price declines we will see this cycle.”.Royal LePage is cautioning policy-makers who may see growing inventory as a sign that Canada’s housing supply crisis has become less urgent compared to election periods when Canadians expressed concern and sought action to improve the supply of housing..“Although demand has temporarily weakened, Royal LePage is concerned that this short-term reprise from rapidly rising home prices may cause decision makers to shift their attention to other issues, thinking Canada’s housing supply crisis can wait, which it cannot,” said Soper..“The current market correction will create pent-up demand. A growing domestic buyer pipeline coupled with the need to house hundreds of thousands of new Canadians threatens to far outstrip the tepid pace of new home construction.”.“We don’t expect to see much movement in housing values through the balance of the year. Canada is experiencing strong growth in household formation, so positive economic news, such as a signal that rates have reached a level where inflation can be managed, should trigger a return to rising property values..“The small percentage of consumers who purchased properties at 2022’s February/March peak will have seen a short-term decline in the value of their homes, but there is little doubt they will soon make up that lost ground.”.Embracing the ‘work-wherever-you-want' world they live in, Canadians looking for a comfortable lifestyle that includes more affordable housing, have left the more expensive regions of the country and continue to go where housing is more affordable, said Soper..“During the first quarter of 2022, there was migration out of Ontario and towards British Columbia, Alberta, Quebec and Nova Scotia, which is supporting home price growth in those regions,” he said. “Excluding the greater regions of Toronto and Vancouver and the city of Ottawa, all remaining major forecast regions such as Halifax, Montreal, Winnipeg, Regina, Calgary and Edmonton saw quarter-over-quarter aggregate home price growth.”.The Royal LePage National House Price Composite is compiled from proprietary property data, nationally and in 62 of the nation’s largest real estate markets. When broken out by housing type, the national median price of a single-family detached home rose 12.4% year-over-year to $859,500, while the median price of a condominium increased 12.2% year-over-year to $589,000. Price data, which includes both resale and new build, is provided by Royal LePage’s sister company RPS Real Property Solutions, a leading Canadian real estate valuation company.
