Royal LePage looks back at the first half of 2023 & sets a forecast for Q3
On July 12th the Bank of Canada delivered yet another interest rate hike, yet Royal LePage believe-despite the upwards pressure-that home prices are set to hold steady throughout 2023. They see a trend of homebuyer's remining strong while seller's apprehension has increased.
However before they looked forward at Q3 of 2023 they set out six market highlights for the first half of the year:
- National aggregate home price remained almost flat year-over-year in Q2 2023 (-0.7% over Q2 2022) and increased 4.0% quarter-over-quarter (second consecutive quarterly increase)
- Aggregate price of a home in Canada in Q2 2023 sits just 5.6% below the peak reached in Q1 of last year
- 94% of regions in the report posted quarterly aggregate home price appreciation
- National year-end forecast updated. Prices in Q4 2023 now expected to rise 8.5% over final quarter of 2022; essentially flat over the next six months
- Chronic shortage of housing supply, due in part to sellers’ hesitancy to list, continues to put upward pressure on home prices
- Royal LePage urges officials to quickly increase support for more development, including affordable, purpose-built rental buildings
Phil Soper, president and CEO of Royal LePage spoke broadly about patterns emerging for the entirely of Canada:
“Almost all Canadian homeowners have seen the value of their properties appreciate handsomely over time. A few who purchased at the tail end of the pandemic-fueled real estate boom saw the value of their homes drop below purchase price during the subsequent market correction,” he said. “We are close to that pivotal point where people who purchased at the peak would break even if they sold today.
“The Bank of Canada’s prolonged series of interest rate hikes has changed where and how people live. It has pushed some buyer hopefuls to choose less expensive housing types or neighbourhoods. Others have chosen to relocate to more affordable markets across their province or across the country. And, some buyers have been pushed to the sidelines indefinitely,” Soper continued. “Economic uncertainty has caused some potential sellers to reevaluate their plans as well. The worry that they will be unable to find the move-up home they need in today’s tight market is a major concern. Further, there are those who secured fixed-rate mortgages at generational lows of two per cent or even less, who are understandably reluctant to wade back into a market with substantially higher borrowing costs. Fewer sellers mean fewer listings, which adds further pressure to our chronic shortage of inventory. Access to affordable housing in Canada will continue to be a major social issue.”
Forecast:
Royal LePage is forecasting that the aggregate price of a home in Canada will increase 8.5 per cent in the fourth quarter of 2023, compared to the same quarter last year. The previous forecast has been revised upward to reflect strong activity and price appreciation in the first half of the year.
“The Bank of Canada remains determined to bring inflation down to its target of less than three per cent. This has proven to be especially challenging at a time when the job market is so strong and Canadians continue to spend, partly due to a build-up of savings during the pandemic,” noted Soper.
“The Canadian real estate market has been in a steady state of recovery since the start of the year. While these additional interest rate hikes, and those potentially to come, will likely put a damper on activity and sales volumes, demand for housing remains very strong. We expect the rate of appreciation to moderate through the second half of 2023, causing home prices to level off or increase marginally.”
On a quarter-over-quarter basis, Royal LePage expects the national aggregate home price to remain essentially flat over the next six months, with only modest quarterly increases.
Focusing in on Greater Vancouver Royal LePage’s report had the following to say:
The aggregate price of a home in Greater Vancouver decreased 2.9 per cent year-over-year to $1,274,400 in the second quarter of 2023. On a quarterly basis, however, the aggregate price of a home in the region increased 4.1 per cent.
Broken out by housing type, the median price of a single-family detached home decreased 4.6 per cent year-over-year to $1,737,800 in the second quarter of 2023, while the median price of a condominium decreased 1.8 per cent to $769,400 during the same period.
“With a continued lack of inventory and buyers eager to transact, home prices increased over this past quarter. The market is returning to normal seasonal trends, although there is some trepidation about interest rates,” said Randy Ryalls, general manager, Royal LePage Sterling Realty. “Buyers who have secured lending at the current rate – and thus would not be immediately affected by the latest rate hike – want to make a purchase as soon as possible. But, if we see another interest rate hike or two, some would-be buyers will pull out of the market entirely. Some may be forced to sell their homes if they can’t afford a mortgage renewal at the higher rate; they may have to rent or move to a more affordable region.”
In the city of Vancouver, the aggregate price of a home decreased 1.6 per cent year-over-year to $1,434,600 in the second quarter of 2023. During the same period, the median price of a single-family detached home decreased 3.3 per cent to $2,561,800, while the median price of a condominium stayed essentially flat, increasing by 0.2 per cent to $821,600.
Ryalls noted that certain markets have maintained some strength, which is indicative of strong buyer interest, specifically for homes in the $1.3-to-$1.5-million range.
“Despite low supply, buyers are astute. People are getting less and less for their money. They are less inclined to compete, and homes that are not properly priced will sit on the market longer.”
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