Home prices to end year 8.5% higher: Royal Lepage

Real estate company Royal Lepage has upgraded its forecast for national home prices despite signs sales and prices may be cooling in the wake of the latest Bank of Canada interest rate hikes.

The national aggregate home price — calculated from the median of all housing types — is projected to rise 8.5 per cent to $821,454 by the end of the year, up from $757,100 in the fourth quarter of 2022, the national brokerage said in its market survey forecast released July 13. That is up significantly from the 4.5 per cent increase Royal Lepage predicted in its April survey, when it said prices would end the year at $791,170.

“The previous forecast has been revised upward to reflect strong activity and price appreciation in the first half of the year,” the company said in a press release. For the second half of 2023, Royal Lepage expects price increases to slow or rise “marginally” quarter over quarter as the latest interest rate hike takes hold.

Still, the company said an ongoing shortage of listings and demand from immigration mean pressure on prices will continue to build.

Canadian housing markets went on a tear in early 2023. Actual national prices rose from $612,855 in January to $728,972 in May and national sales leapt, according to data from the Canadian Real Estate Association (CREA).

The renewed activity caught the Bank of Canada’s attention and contributed to its decision to hike rates again to a 22-year high of five per cent on July 12, following a surprise increase in June.

In its statement on the rate hike, the central bank noted the economy performed “stronger than expected, with more momentum in demand ” including in the housing market , which “has seen some pickup.” It added that a drop in housing starts and an overall lack of supply are “adding pressure to prices.”