Royal LePage boosts 2023 home price forecast as activity picks up

Houses for sale in Ottawa

‘Prices are rising faster than they should be’

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An earlier-than-expected boost in activity in Canada’s major housing markets is leading real estate firm Royal LePage to raise its forecast for home price gains in 2023.

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The real estate firm’s first quarter 2023 house price survey and market forecast, released April 13, projects the aggregate price of a home will be 4.5 per cent higher in the fourth quarter of 2023 than in the final quarter of 2022, well up from the previous forecast of a modest one per cent decrease.

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“The prices are rising faster than they should be, simply because the number of homes available for sale is so restricted with demand rising,” Royal LePage chief executive Phil Soper said in an interview.

This bump is “quite a change” in just three months since the beginning of 2023, Soper said, adding that recovery has been stronger for a few reasons, including steady interest rates and stronger-than-anticipated employment rates.

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The Bank of Canada left its benchmark interest rate unchanged at 4.5 per cent on April 12, releasing updated forecasts that suggest Canada will avoid a recession.

“So when you add all this together, we’ve reached the end of the market correction — the downturn in real estate — and the market is growing again, as of about the middle of March,” Soper said.

Activity levels in the first quarter of 2023 surpassed the firm’s expectations while national aggregate home prices jumped 2.8 per cent quarter over quarter.

Royal LePage said demand is again outpacing supply as buyers return in force, particularly first-time homebuyers, while housing supply conditions remain “ultra-low.”

With demand rising, the number of new homes listed for sale would normally be expected also rise rapidly, but inventory is not keeping up, Soper said.

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He described first-time homebuyers as an “interesting portion” of the market because they take from inventory but offer nothing up, as opposed to people who sell when they buy.

“I believe we run the risk with having a large number of new homeowners entering the market and not adding to inventory and we already have (an existing) challenge with inventory, which is one of the main reasons our forecast had to be adjusted upward,” Soper added.

Royal LePage’s national house price composite is compiled from national property data, as well as 62 of the country’s largest real estate markets.

Quarter-over-quarter, the national median price of a single-family detached home was up 3.4 per cent, while the median price of a condominium was up 1.8 per cent, the report said.

Quarterly aggregate prices in the Greater Toronto Area gained 4.8 per cent in the first quarter, while the greater regions in Montreal and Vancouver both posted 1.3 per cent in the same quarter.

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