Royal LePage has cut its house price forecast for this year amid a series of aggressive interest rate hikes that have raised the cost of borrowing and cooled demand for housing.
The realtor had forecast Canadian home prices to rise 15% over the course of 2022, fueled by a 16.5% increase in the GTA.
But now he says he expects prices in the GTA to rise only about three percent by the fourth quarter of 2022. His forecast for all of Canada calls for the median home price to rise about five percent by the fourth quarter. of 2022.
The forecast comes on the heels of the Canadian Housing and Mortgage Corporation also lowering its price predictions for the country’s real estate. Now he says he expects average prices to fall as much as 5 percent between the first quarter of this year and the second quarter of 2023 if interest rates continue to rise.
“We have significantly lowered our outlook for 2022, however, home prices are still forecast to end the year higher than 2021 and well above pre-pandemic norms,” Royal LePage Chairman and CEO said. , Phil Soper, in a press release. “Following record price increases across the country, numerous markets in southern Ontario and parts of Greater Vancouver, specifically those that experienced one of the largest price appreciations in the past two years, saw a drop in the second quarter. I expect this highly unusual downward movement in home values to be short-lived as the country’s chronic housing shortage remains unresolved.”
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As recently as April, Royal LePage forecast the median home price in the GTA to exceed $1.3 million by the end of 2022, however, it is now forecasting a median price of $1,153,394 by the end of the year. That’s roughly in line with the $1,119,800 the average house in GTA was changing hands for at the end of 2021.
The more pessimistic forecast comes after GTA home prices fell for the fourth month in a row in June and sales plummeted 41 per cent.
The Bank of Canada is also widely expected to raise its key overnight rate by 0.75 percent today, which could further push up the cost of borrowing.
In the statement, Soper said Royal LePage believes the second quarter of 2022 will end up “producing most of the price declines we’ll see this cycle” with values more or less holding for the rest of the year.
He also said the current recession “will create pent-up demand” that could eventually drive prices higher once economic conditions change.
Real estate for sale signs displayed in Oakville, Ontario. on Saturday, December 1, 2018. THE CANADIAN PRESS/Richard Buchan
“We don’t expect to see much movement in home values for the rest of the year,” he said. “Canada is experiencing strong growth in household formation, so positive economic news, such as a sign that rates have reached a level where inflation can be controlled, should trigger a return to rising home values. the properties. The small percentage of consumers who bought properties at the peak of February/March 2022 will have seen a short-term decline in the value of their homes, but there is no doubt that they will soon make up lost ground.”
According to Royal Lepage, the second quarter of this year marked the first quarter-on-quarter drop in house prices since the beginning of 2019, with resale values falling 4.9% on average across Canada.
The drop was steepest in the Greater Toronto Area, where average prices fell about 8.1 percent.
However, the slowdown was not felt equally throughout the city’s real estate market.
Royal LePage says median condo prices were only down 3.3 percent in the second quarter, compared to a 9.5 percent drop in single-family home prices.