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Real Estate

Home prices edged higher in ‘sluggish’ Q3, expected to move higher: Royal LePage

Royal LePage CEO Phil Soper says Canada's housing market has remained 'sluggish' despite recent changes to mortgage loan rules.

Home prices across Canada ticked slightly higher in the third quarter, according to figures from Royal LePage, but despite low activity during the summer, prices are expected to move higher in the fourth quarter.

The aggregate national home price ticked modestly higher during the third quarter by 1.6 per cent annually to $815,500, while falling 1.1 per cent from the previous quarter, according to Royal LePage’s latest Home Price Survey, released Thursday.

The survey noted that most markets across the county saw “sluggish activity” during the summer, while sales volumes moved higher in September. Additionally, the report found 38 per cent of regional markets saw aggregate price gains during the third quarter compared to the previous quarter.

Phil Soper, the president and CEO of Royal LePage, said in an interview with BNN Bloomberg Thursday that real estate activity has generally been muted after a series of interest rate cuts from the Bank of Canada that brought the key policy rate to 4.25 per cent in September.

“It’s been sluggish… I will say September was a different story than July to August, but three (interest rate) cuts, and if you look at previous changes in monetary policy, the market tends to react a little more quickly. So, it’s been slow, I hope to say slow and steady as we look forward to the fall,” he said, noting that activity in Vancouver and Toronto has already started to rise.

In a press release Thursday, Soper highlighted that buyer demand remained low across the country, especially among first-time buyers and small investors. However, he noted that he anticipates those groups will re-enter the market as further rate cuts from the Bank of Canada will likely drive prices higher and incentivize first-time buyers to enter the market.

“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,” he said in the release.

“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.”

According to the report, Royal LePage is forecasting aggregate home prices to rise 5.5 per cent in the fourth quarter of 2024 compared to the previous year.

“The market recovery, albeit uneven across the country, is well underway in a majority of markets. While we may not see significant price appreciation in the typically slower fourth quarter of this year, we believe our previous forecast will come to fruition in the anticipated early spring market of 2025,” Soper said in the release.

New lending rules

Last month, the Office of the Superintendent of Financial Institutions (OSFI) moved to ease stress test requirements for uninsured mortgages for those switching providers.

Soper told BNN Bloomberg he thinks the impact of the change will “be material.”

“If you look at our 64-city home price index….12 cities are brought into play if you will, where the median detached home price is between a $1 million and a $1.5 million. Places like Victoria, B.C. and Milton, Ontario, people either move up or first-time home buyers will be able to get mortgage insurance for what amounts to a basic single-family home,” he said.

“And that was one of the big challenges. Prices in Calgary are not prices in Toronto, so regulators have reacted, and I think it’ll be a material bump in that space.”