The Canadian housing market experienced some turbulence last year due to higher interest rates and slowing sales, but its enduring resilience remains the standout feature.
The average home price saw a gain of 4.3 per cent year-over-year to $789,500 in the fourth quarter of 2023, according to data from Royal LePage‘s house price survey. When broken out by housing type, the median price of a single-family detached home increased 4.4 per cent to $816,100, while that of a condominium rose four per cent to $583,900.
Despite this, home prices have still not fully recovered from the correction, with the average price of a home in Canada sitting 7.9 per cent below the peak reached in the first quarter of 2022. However, the national average home price remains well above pre-pandemic levels. In Q4 2023, it was up 18.7 per cent over the same period in 2020, and 22.2 per cent over the same period in 2019.
Regionally, Calgary recorded the highest year-over-year price appreciation of 10.7 per cent. Throughout the second half of 2023, while prices declined modestly across the country due to a rise in inventory levels, the city bucked the trend continuing on its upward price trajectory.
In Toronto and Montreal, the average home price increased 5.1 per cent and 4.1 per cent, respectively, year-over-year in Q4 2023. Smaller markets that faired similarly well are Ottawa, Halifax and Winnipeg, which saw prices rise between 4.7 and 4.8 per cent. More modest gains were seen in Vancouver (2.7 per cent), Regina (2.2 per cent) and Edmonton (0.8 per cent).
These numbers highlight that while elevated borrowing costs have affected housing activity, Canadians are adapting to mid-single digit rates. In further support of this is that nearly two years after the Bank of Canada began raising interest rates, mortgage delinquency remains at historic lows. Savings levels are also materially higher than normal, reports Royal LePage.
For 2024, the real estate brokerage is forecasting the national housing market may return closer to normal. New statistics out of the country’s most populous city supports this, as January saw strong sales growth in Toronto across all asset classes in comparison to the same month last year. The average home sale price settled at $1,026,703, closely mirroring the figures from January 2023. The market’s activity signals a resurgence in buyer confidence and suggests 2024 is gearing up to be considerably busier than its predecessor.
As for how the year will unfold, Royal LePage expects Canadian home prices will see modest gains in the first two quarters of 2024, with more considerable increases seen in the second half of the year following the projected start of interest rate cuts by the Bank of Canada. The average price of a home is forecast to be 3.3 per cent higher in Q1 2024, compared to the same quarter in 2023, reflecting a 0.5 per cent increase over Q4 2023. In Q2, the average home price is anticipated to be 0.2 per cent higher year-over-year and 0.9 per cent above the previous quarter. By the fourth quarter, the average home price is predicted to rise 5.5 per cent year-over-year to $843,684, with the median price of a single-family detached property and condominium forecast to increase six per cent and five per cent to $879,164 and $616,140, respectively.
Home prices are expected to climb this year in all major markets across the country, with Calgary to see the greatest gains at eight per cent, and Vancouver to experience a more modest increase of three per cent.
This forecast is based on the expectation that the country’s central bank has concluded its interest rate hike campaign, it will hold rates steady at five per cent through the first half of the year and then begin to modestly ease them in late summer or fall.
A lot of future activity will also be dependent on the timing of mortgage renewals. Many would-be move-up buyers who have enjoyed ultra-low rates for the past few years will be willing to make a move as their current loan terms expire. No longer bound to their present property because of the interest rate, more of these owners will put their properties on the market and begin their search for a new home.
Investor-owned properties, namely condominiums, could also add supply to the market over the next year or two, as mortgages come up for renewal and owners choose to sell rather than renew at a higher rate, especially if their tenanted properties are not producing positive cash-flow. This, in addition to new legislation that incentivizes the development of purpose-built rental properties, could add some much-needed inventory to the entry-level market. However, it will not be enough to put downward pressure on prices.