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Royal LePage: Canadian home price forecast revised upward to 16% as roaring...

Royal LePage: Canadian home price forecast revised upward to 16% as roaring spring market eases into summer

by Laura Forester | July 20, 2021


Highlights 

  • Demand expected to outstrip supply with upward pressure on prices, yet the pace of increases should moderate as peak price appreciation was reached in early Q2
  • Greater Montreal’s aggregate home price forecast to increase 17.5% year-over-year; the highest in Canada among forecasted regions
  • Detached house prices continue to outpace condo appreciation, but the gap is narrowing
  • Proposed increase to municipal land transfer tax in the City of Toronto could further reduce housing supply

 

Forecast

Royal LePage is forecasting that the aggregate price of a home in Canada will increase 16% to $771,500 in the fourth quarter of 2021, compared to the same quarter last year. 

While the rate of price appreciation is decelerating, a boost in demand is expected in the fall from foreign students, newcomers and investors as pandemic-era restrictions are lifted and the effects of the global health crisis wane.

“Over the past six months, soaring prices and intense competition for the limited supply of homes for sale have left many Canadians frustrated with their inability to improve their housing situation. As home prices stabilize, many of these potential buyers, who will have had time to build up a larger down payment, should have an opportunity to transact,” said Soper.

With COVID-19 cases on the decline and rates of full immunization rapidly rising, a return to pre-pandemic life seems imminent. This will mean a boost in immigration, the return of jobs in the hospitality and tourism industries, and the return of foreign students.

“Household formation will undergo another major shift before the end of the year, with many young Canadians who chose to move in with parents during the lockdowns looking for their own places to live. As the hospitality industry reopens and employment opportunities abound, new sources of housing demand will emerge. Finally, we will welcome back hundreds of thousands of foreign students and a new wave of immigration. All of these people need to put a roof over their heads, which will encourage a wave of entrepreneurial landlords – investors eager to provide rental accommodation.

“These new sources of demand should sustain the housing market at buoyant levels through the all-important spring market in 2022,” Soper concluded.

 

Housing supply and government policy

A systemic housing supply shortage remains the biggest threat to Canadians’ dreams of home ownership, or even a decent home to rent. Driven by the country’s ambitious economic growth plans, the population will continue to expand. With a lack of housing inventory in markets from coast to coast, competition for available property will remain acute and home prices will continue to rise.

 

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