Canada’s spring market missed the memo in 2024, and in the following months, housing markets continued to see sluggish buying and selling activity. After a summer of subdued buyer demand, which caused home prices to plateau or decline in the third quarter across many markets in Canada, activity is finally starting to pick up ahead of further expected interest rate cuts.
While we may not see significant price appreciation in the typically-slower fourth quarter of this year, we believe we’ll see a pull-ahead of the spring market in 2025. Royal LePage® is forecasting that the aggregate1 price of a home in Canada will increase 5.5% in the fourth quarter of 2024, compared to the same quarter last year.
“Despite three cuts to the Bank of Canada’s overnight lending rate, buyer demand nationally remains weak, particularly among two key groups: first-time homebuyers and small investors,” said Phil Soper, president and chief executive officer, Royal LePage. “First-time buyers, who are more sensitive to interest rates, are adopting a wait-and-see attitude. With home prices essentially flat and interest rates steadily declining, they perceive no penalty in postponing their purchase.
“Similarly, small investors who typically buy condominiums to rent out and supply much of Canada’s rental housing, are also hesitant. Elevated rates have made the financials unworkable, with carrying costs surpassing rental income. While historically some landlords accept negative cash flow temporarily when properties are appreciating in value, the current flat prices do not justify many investments,” said Soper. “We believe that both groups will re-enter the market in significant numbers as property values begin to rise again. With further rate cuts from the Bank of Canada likely this year, we anticipate prices will appreciate more quickly, eliminating the advantages of waiting for first-time buyers and making calculations more favourable for investors.”
Home prices at a standstill in Q3
According to the Royal LePage House Price Survey, the aggregate price of a home in Canada increased 1.6% year over year to $815,500 in the third quarter of 2024. On a quarter-over-quarter basis, however, the national aggregate home price decreased 1.1%, following sluggish activity in most – though not all – markets through the summer months. Coast to coast, sales volumes began to pick up in September, and more than one third (38%) of regional markets covered in the report recorded positive aggregate price gains in the third quarter over the previous quarter.
When broken out by housing type, the national median price of a single-family detached home increased 2.0% year over year to $850,400, while the median price of a condominium increased 0.5% year over year to $590,200. On a quarter-over-quarter basis, the median price of a single-family detached home decreased modestly by 1.2%, while the median price of a condominium decreased 1.1%. Price data, which includes both resale and new build, is provided by RPS Real Property Solutions, a leading Canadian real estate valuation company.
Market revival uneven across major cities
As was true of the pandemic-era real estate boom, the recovery is not unravelling evenly. Just as two of Canada’s largest and most expensive markets reached higher highs and lower lows between 2020 and 2023, Toronto and Vancouver are now lagging behind in the recovery as well. Meanwhile, regional markets in the province of Quebec and in the Prairies have shown greater resilience through the period of elevated interest rates.
“It’s taking longer for activity and home prices to bounce back in major cities where affordability challenges are greatest. Following subdued activity this spring and summer in the Greater Toronto Area, we’ve begun to see a turnaround in the fall market with an increase in buyer demand and a boost in sales. Greater Vancouver has yet to catch up,” noted Soper.
New mortgage lending rules give first-time buyers hope
In recent weeks, a series of new regulations impacting mortgages and lending practices in Canada were announced. Starting on December 15th, all purchasers of new construction homes and all first-time buyers will be able to acquire an insured mortgage with a 30-year amortization period.2 In addition, the federal government announced an increase to the insured mortgage cap from $1 million to $1.5 million.
Following the announcement of these changes, the Office of the Superintendent of Financial Institutions (OSFI) revealed that, beginning November 21st, it will eliminate the mortgage stress test for uninsured borrowers who plan to switch lenders upon renewing their loan, provided they maintain the same amortization schedule and loan amount.3
“These changes will have more impact on the early 2025 market than many anticipate. Expect a material bump in activity,” said Soper. “In addition to assisting first-time buyers, raising the cap on insured mortgages expands opportunities for move-up buyers in higher-priced markets, thereby freeing up inventory for new homeowners entering the market. While these updated mortgage rules are a timely strategy to alleviate some affordability pressure, they are not a silver bullet for the fundamental issue that persists: Canada urgently needs more housing supply. Continued efforts to boost inventory are essential for fostering a sustainable and healthy real estate market for future generations.”
Read Royal LePage’s third quarter release for national and regional insights.
- Greater Montreal’s aggregate home price increased 5.2% year over year, while the greater Toronto and Vancouver markets showed little change, rising 0.7% and 0.5%, respectively.
- For the second consecutive quarter, Quebec City recorded the highest year-over-year aggregate price increase (10.5%) in Q3 among the report’s major regions.
- Major markets in the prairie provinces continue to show resilience and strength, as tight supply pushed prices upward in Q3.
- Royal LePage expects home prices to remain stable through Q4; forecasts pull-ahead of spring market on expectation of continued easing of lending rates.
1Aggregate prices are calculated using a weighted average of the median values of all housing types collected. Data is provided by RPS Real Property Solutions and includes both resale and new build.
2Federal government announces landmark adjustments to mortgage rules for first-time buyers in Canada, September 17, 2024
3OSFI to drop mortgage stress test for uninsured borrowers who switch lenders at renewal, October 3, 2024
