Royal LePage is forecasting that the aggregate price of a home in Canada will increase 5% in the fourth quarter of 2022, compared to the same quarter last year. The forecast has been revised downward from the previous quarter following more aggressive than expected interest rate hikes by the Bank of Canada, resulting in an expected temporary drop in demand in parts of southern Ontario and British Columbia.
“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 Phil Soper, president and CEO of Royal LePage. “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.
According to the Royal LePage House Price Survey released today, the aggregate1 price of a home in Canada increased 12.1% year-over-year to $815,000 in the second quarter of 2022. On a quarterly basis, the aggregate price of a home in Canada decreased 4.9% in the second quarter after reaching record year-over-year highs in Q1. 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 (since Q1 2019) to post a quarter-over-quarter decline in home prices.
“We don’t expect to see much movement in housing values through the balance of the year,” added Soper. “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.”
When broken out by housing type, the national median price of a single-family detached home rose 12.4% per cent year-over-year to $859,500, while the median price of a condominium increased 12.2% year-over-year to $589,000.
Read Royal LePage’s second quarter release for national and regional insights.
Second quarter press release highlights:
- National aggregate home price increases 12.1% year-over-year in second quarter of 2022; decreases 4.9% quarter-over-quarter.
- Royal LePage reduces national home price forecast to +5.0% in fourth quarter of 2022; expects home prices to hold relatively flat through the second half of the year in greater regions of Toronto and Vancouver. Greater Montreal Area expected to see continued price appreciation.
- An uneven market recovery is expected as some regions experience continued price appreciation, while others soften.
- Interprovincial migration to affordable real estate markets supports home price growth in Alberta, Prairies and Atlantic Canada.
- Royal LePage cautions policy makers that growing inventory is masking an acute urgency to solve Canada’s housing supply crisis.