Canada Real Estate Market Set to Return to Normal in 2024, Survey says

According to the Royal LePage Market Survey Forecast, the Canada real estate market is projected to see a 5.5% increase in home prices in 2024, with Calgary expected to experience the greatest gains. Learn more about the forecasted changes in the Canadian real estate market.

After years of unprecedented irregularity, Canadians may see the real estate market return closer to normal in 2024. According to the Royal LePage Market Survey Forecast, the aggregate price of a home in Canada is set to increase 5.5 per cent year over year to $843,684 in the fourth quarter of 2024, with the median price of a single-family detached property and condominium projected to increase 6.0 per cent and 5.0 to $879,164 and $616,140, respectively. Home prices are expected to rise next year in all major markets across the country, with Calgary forecast to see the greatest gains. Throughout the second half of 2023, while prices have been declining in other cities, the Calgary real estate market has bucked the trend continuing on an upward price trajectory.

Over the last eighteen months, sales activity in most of Canada's major real estate markets has been on the decline, while inventory levels have gradually increased. While transactions are down as much as 20 or 30 per cent in some regions, home prices have only declined modestly during this time, due to a simultaneous drop in demand as buyer hopefuls continue to hold out for lower interest rates. Still, prices remain above 2022 levels.

Nationally, home prices are forecast to see modest quarterly gains in the first two quarters of 2024, with more considerable increases expected in the second half of the year, following the anticipated start of interest rate cuts by the Bank of Canada. The aggregate price of a home in Canada is forecast to be 3.3 per cent higher in Q1 of 2024 compared to the same quarter in 2023, reflecting a 0.5 per cent increase over the fourth quarter of 2023. In the second quarter of next year, the national aggregate home price is forecast to be 0.2 per cent higher year over year and 0.9 per cent above the previous quarter. In the third quarter, home prices are expected to be 3.3 per cent higher year over year and 2.3 per cent higher on a quarterly basis. And, in the fourth quarter of 2024, the national aggregate price of a home is expected to land 5.5 per cent above the same quarter in 2023, an increase of 1.7 per cent quarter over quarter. Based on this forecast, by the end of next year, home prices will have essentially climbed back to their pandemic peak, reached in the first quarter of 2022.

Supply shortage and affordability challenges Canada continues to struggle with a chronic housing supply shortage. According to the Canada Mortgage and Housing Corporation, the country needs about 3.5 million additional housing units by 2030 to restore affordability, with the greatest need concentrated in the provinces of Ontario and British Columbia. At the current pace of housing construction and considering the rate of new household formation and immigration projections, inventory will remain out of step with projected demand for years to come.

In the federal government's Fall Economic Statement released last month, billions of dollars were committed and reaffirmed towards increased levels of new housing construction. This includes favourable loan agreements and tax benefits for developers of purpose-built rental buildings and public housing projects, as well as financial assistance for municipalities to crack down on short-term rentals in an effort to push more supply onto the resale market in urban centres.

MARKET SUMMARIES

Greater Toronto Area

In the Greater Toronto Area, the aggregate price of a home in the fourth quarter of 2024 is forecast to increase 6.0 per cent year over year to $1,198,012. During the same period, the median price of a single-family detached property is expected to rise 7.0 per cent to $1,481,950, while the median price of a condominium is forecast to increase 5.0 per cent to $754,845.

Greater Montreal Area

In the Greater Montreal Area, the aggregate price of a home in the fourth quarter of 2024 is forecast to increase 5.0 per cent year over year to $610,260. During the same period, the median price of a single-family detached property is expected to rise 4.5 per cent to $684,998, while the median price of a condominium is forecast to increase 6.0 per cent to $471,912.

In its fall economic update, the Quebec government pledged $1.8 billion over five years to improve access to housing in the province. This investment will include actions to accelerate the construction of affordable housing, as well as assistance to municipalities in the form of increased flexibility in urban planning bylaws, measures to facilitate the construction of secondary suites, and support for the training of the construction workforce.

What's more, Montreal is the Canadian city where housing starts fell the most in the first six months of 2023, a 26-year record, and the prognosis for 2024 is not optimal. Rising borrowing costs have taken a heavy toll on builders' and developers' portfolios over the past year. For this reason, it is expected that when interest rates start to decline, the pent-up demand will unleash on the condominium segment in the Greater Montreal Area, which will see an appreciation rate slightly higher than that of single-family homes. Economic conditions in the province were heavily weighed down at the end of the year by the outbreak of strikes in the public sector, as well as numerous layoffs across a myriad of industries, which could influence consumer confidence regarding large purchases such as a property in 2024, despite a widely expected drop in interest rates.