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National Home Prices Surpass 2022 Levels Despite Slow Market Activity

Introduction The Canadian housing market ended 2023 with national home prices surpassing the previous year's levels, despite a slowdown in market activity. Although there was a decrease in the national aggregate home price in the...

Introduction

The Canadian housing market ended 2023 with national home prices surpassing the previous year's levels, despite a slowdown in market activity. Although there was a decrease in the national aggregate home price in the fourth quarter, Royal LePage expects sidelined buyers to re-engage in the market this quarter, anticipating rate cuts by the Bank of Canada. This article explores the highlights of the fourth quarter of 2023 and provides insights into the future outlook for the Canadian housing market.

Fourth Quarter Highlights

  • National aggregate home prices increased by 4.3% year over year in Q4 2023, despite a 1.7% decrease quarter over quarter.
  • Greater regions of Toronto, Montreal, and Vancouver witnessed gains of 5.1%, 4.1%, and 2.7% year over year, respectively.
  • Calgary recorded the highest year over year price appreciation at 10.7% and was the only major region with quarterly price gains in Q4 2023.
  • 81% of regional markets experienced a quarter-over-quarter decline.
  • Approximately 2.2 million mortgages in Canada will be renewing over the next two years, most at higher interest rates.
  • The national aggregate home price is expected to rise by 5.5% year over year in Q4 2024.

National Home Prices Image Source: Royal LePage

Market Analysis

The Royal LePage House Price Survey reveals that the recovery of the housing market does not solely depend on lowered interest rates from the Bank of Canada. The key factor lies in consumer confidence that the value of their purchased homes will not decline in the future. This tipping point is expected to occur in the first quarter, even before the anticipated rate cuts.

Market sentiment plays a significant role in market trends, along with inventory levels and interest rates. Early signs of home price stability indicate that the market is on the brink of recovery. Despite the correction in home prices, the national aggregate home price remains significantly above pre-pandemic levels.

Outlook and Predictions

As interest rates are expected to remain steady in the first part of 2024, Royal LePage projects modest quarterly gains in home prices during the first half of the year. However, a more considerable increase is anticipated in the second half, driven by the boost in activity following the expected series of interest rate cuts.

Regional Summaries

Greater Toronto Area

The aggregate price of a home in the Greater Toronto Area (GTA) increased by 5.1% year over year, reaching $1,123,300 in the fourth quarter of 2023. Although the aggregate price decreased by 2.1% on a quarterly basis, a brisk spring real estate market is expected if the Bank of Canada concludes its interest rate increase campaign.

Greater Montreal Area

In the Greater Montreal Area (GMA), the aggregate price of a home increased by 4.1% year over year, amounting to $566,800 in Q4 2023. With a modest decrease of 1.5% on a quarterly basis, the region is poised for renewed optimism as a drop in interest rates seems likely in 2024.

Greater Vancouver

The Greater Vancouver region saw a 2.7% increase in the aggregate price of a home year over year, reaching $1,220,100 in Q4 2023. While the quarterly aggregate price remained relatively flat with a 0.7% decrease, a potential drop in interest rates could stimulate market activity and increase competition among buyers.

Ottawa

Ottawa experienced a 4.8% increase in the aggregate price of a home year over year, amounting to $754,700 in the fourth quarter of 2023. However, the region witnessed a 1.1% decrease in the aggregate price on a quarterly basis. The anticipation of decreasing interest rates is expected to spark heightened activity in the housing market by the end of the first quarter.

Calgary

Calgary stood out among the major regions, recording the highest year over year price appreciation of 10.7% in Q4 2023. The aggregate price of a home in Calgary increased to $663,500. Moreover, the region was the only one to post quarterly price gains, further emphasizing its strong performance in the housing market.

Edmonton

Edmonton experienced a modest increase of 0.8% in the aggregate price of a home year over year, amounting to $430,500 in the fourth quarter of 2023. On a quarterly basis, the aggregate price decreased slightly by 0.6%. The region foresees a listing deficit, with historically low inventory levels, and expects increased market activity with a potential decline in lending rates.

Halifax

Halifax witnessed a 4.7% increase in the aggregate price of a home year over year, reaching $490,900 in Q4 2023. On a quarterly basis, the aggregate price decreased by 1.6%. The market remains competitive due to historically low supply levels, and sidelined buyers are expected to return as borrowing capacity improves.

Winnipeg

The aggregate price of a home in Winnipeg increased by 4.7% year over year, reaching $378,000 in the fourth quarter of 2023. However, a quarterly decrease of 2.0% was observed. The region experienced a surge in market activity towards the end of the quarter, indicating strong buyer interest and setting the stage for an active spring market.

Regina

Regina witnessed a 2.2% increase in the aggregate price of a home year over year, amounting to $367,600 in Q4 2023. On a quarterly basis, the aggregate price remained virtually flat with a 0.3% decrease. The market faces inventory shortages, leading to competition and upward pressure on home prices.

Conclusion

Although the Canadian housing market experienced a slowdown in market activity, national home prices surpassed the previous year's levels. With the anticipated rate cuts by the Bank of Canada, sidelined buyers are expected to re-engage, driving market activity and contributing to the growth of the housing market in the coming quarters. The recovery will be influenced by factors such as buyer sentiment, inventory levels, and future interest rate adjustments.

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