Home prices are forecast to rise in all major markets next year
The real estate market is forecast to return to normal in 2024 after years of irregular movements, according to a report by Royal LePage, a real estate franchiser.
In its Market Survey Forecast, it found that the aggregate price of a home in Canada is set to increase by 5.5% year-over-year to the fourth quarter of 2024 which will amount to $843,684. The median price of a single-family detached property and condominium is also expected to increase by 6% and 5% which amounts to $879,164 and $616,140, respectively.
Phil Soper, the president and CEO of Royal LePage, stated that 2024 will be an important tipping point for the national economy because the majority of Canadians acknowledge that the norm of very low interest rates is over.
“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,” said Soper.
Home prices are projected to rise in all major markets in Canada next year and Calgary is forecast to have the highest increases. Notably, Calgary continued an upward trend in its home prices even as prices declined in other cities during the second half of 2023.
A new normal in the housing market
In the first two quarters of 2024, home prices are forecast to see quarterly gains as more increases are expected for the second half of the year. This will follow anticipated interest rate cuts by the central bank.
The aggregate home price in Canada is expected to be 3.3% higher in Q1 2024 compared to Q1 2023. Then, it will be 0.2% higher year-over-year by the second quarter. In Q3 2024, the prices are projected to be 3.3% higher year-over-year. In Q4 2024, it is expected that the national aggregate price will be 5.5% higher year-over-year.
By the end of 2024, the report expects that home prices will climb back to their pandemic peak previously reached in Q1 2022.
“For the last year, many Canadians have been fixated on the idea of interest rates needing to come down significantly before they can afford to enter or re-enter the housing market,” said Soper.
“Acceptance that a mortgage rate of 4-5% is the new normal should untether pent-up demand as first-time buyers, flush with savings collected during the extended down market in housing, regain the confidence to go home shopping,” he added.
Soper said that he is expecting families who put off home upgrades to begin listing their properties in greater numbers as first-timer demand returns.
Royal LePage’s forecast is based on its anticipation that the Bank of Canada will keep its key lending rate at 5% for the first half of 2024. While the central bank is expected to make cuts in either late summer or fall of the next year, major financial institutions have already started providing discounts on fixed-rate mortgages.
