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

Second quarter regional highlights:

• Aggregate price of a home in Canada rose 25.3% year-over-year in the second quarter
• 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
• Post-pandemic policies needed to address chronic low inventory challenges
• Proposed increase to municipal land transfer tax in the City of Toronto could further reduce housing supply

TORONTO, July 14, 2021 /CNW/ - According to the Royal LePage House Price Survey released today, the aggregate¹ price of a home in Canada increased 25.3 per cent year-over-year to $727,000 in the second quarter of 2021, as inventory shortages continue across the country. Eighty-nine per cent of the regions surveyed saw year-over-year double-digit aggregate price gains, driven largely by increases in the single-family detached property segment. However, the level of competition seen in recent months is beginning to slow.

The Royal LePage National House Price Composite is compiled from proprietary property data, nationally and in 62 of the nation's largest real estate markets. When broken out by housing type, the median price of a single-family detached home rose 27.1 per cent year-over-year to $765,000, while the median price of a condominium increased 11.7 per cent year-over-year to $525,000. Price data, which includes both resale and new build, is provided by Royal LePage's sister company RPS Real Property Solutions, a leading Canadian real estate valuation company.

During the second quarter, the company revised its House Price Survey methodology, including geographical boundaries and housing types. Royal LePage's aggregate prices are calculated using a weighted average of the median values of all housing types collected. This improves accuracy as surges of transactions in the upper end or lower end of the real estate market are less likely to skew results.

"After a year of record growth in the Canadian housing market, we appear to have passed the peak of price appreciation," said Phil Soper, president and CEO of Royal LePage. "While current home price gains are expected to be sustained due to chronically low inventory and new demand from growing household formation, investors and newcomers, the torrid pace of home price appreciation has begun to moderate."

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¹ Aggregate prices are calculated using a weighted average of the median values of all housing types collected. Data is provided by RPS Real Property Solutions and includes both resale and new build.

Forecast 

Royal LePage is forecasting that the aggregate price of a home in Canada will increase 16 per cent to $771,500 in the fourth quarter of 2021, compared to the same quarter last year. The previous forecast, released in April, 2021, has been revised upward to reflect the current state of the market. 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.

"Policy makers in this country have struggled for years to address our housing supply crisis," stated Soper. "All too often our political leaders fall into the 'quick fix' trap, throwing new taxes or regulations at the housing economy which do little but temporarily push people to the sidelines, creating pent-up demand. That temptation looms large now. Yet, what Canadians do not need are pandemic-era policies in a post-pandemic economy. We need to address the fundamental flaws in our development approval processes, so we may someday have the homes our people require. It is our only hope to address housing affordability." 

Royal LePage House Price Survey Chart: rlp.ca/house-prices-Q2-2021
Royal LePage Forecast Chart: rlp.ca/market-forecast-Q2-2021

REGIONAL SUMMARIES

Greater Toronto Area

The aggregate price of a home in the Greater Toronto Area increased 18.2 per cent year-over-year to $1,035,000 in the second quarter of 2021. Broken out by housing type, the median price of a single-family detached home increased 28.2 per cent to $1,301,000, while the median price of a condominium increased 8.6 per cent to $630,000 during the same period.

"Until a real solution to the chronic housing supply shortage is implemented, prices will continue to rise," said Karen Yolevski, chief operating officer, Royal LePage Real Estate Services Ltd.  "We may see a slight slowdown over the summer, but demand is expected to rise again in the fall with the return of students to in-person learning, the revival of the tourism and hospitality industries, and an increase in immigration. That demand will increase competition and continue to push prices upward."

In the city of Toronto, the aggregate price of a home increased 8.3 per cent year-over-year to $1,115,000 in the second quarter of 2021. During the same period, the median price of a single-family detached home increased 14.8 per cent to $1,550,000, while the median price of a condominium increased 5.8 per cent to $695,000.

Yolevski added that while the pandemic has driven demand in the suburbs and rural areas, the return to normal socialization habits will once again draw Canadian home buyers to the city centres.

"Young people will always be drawn to the downtown core. The walkability, access to restaurants and entertainment, and the diversity of different neighbourhoods will once again become top priorities for potential buyers once the fear caused by the pandemic diminishes," noted Yolevski.

Toronto City Council is currently reviewing a report outlining possible revenue tools, including an increase to the land transfer tax on homes valued at $2 million or more. Royal LePage president and CEO, Phil Soper, says that in a city where homeowners already pay two land transfer taxes, one to the province and one to the municipality, any increase would only exacerbate the region's inventory shortage issue.

"Land transfer taxes restrict the free movement of people and businesses, and have the ability to damage the city's economy," said Soper. "An increase to the tax could further reduce the already paper-thin supply of housing in Toronto, by preventing people from choosing to move for a better job or quality of life."

Royal LePage is forecasting that the aggregate price of a home in the Greater Toronto Area will increase 14.5 per cent in the fourth quarter of 2021, compared to the same quarter last year. The previous forecast, released in April, 2021, has been revised upward to reflect the current state of the market.

Royal LePage House Price Survey Chart: rlp.ca/house-prices-Q2-2021
Royal LePage Forecast Chart: rlp.ca/market-forecast-Q2-2021

Greater Montreal Area

The aggregate price of a home in the Greater Montreal Area increased 21.7 per cent year-over-year to $514,000 in the second quarter of 2021. Broken out by housing type, the median price of a single-family detached home increased 25.5 per cent to $559,000, while the median price of a condominium increased 14.1 per cent to $405,000 during the same period.

"We're still seeing extremely high home price appreciation rates this quarter, but we believe the peak of home price increases should be behind us," said Dominic St-Pierre, vice president and general manager of Royal LePage for the Quebec region. "The vaccination rate in the province is on track, which allows people to look beyond their life at home and focus on travelling and enjoying activities with family and friends. Also, many potential first-time homebuyers postponed their purchase hoping to face less competition in the next six to 12 months."

In Montreal Centre, the aggregate price of a home increased 14.3 per cent year-over-year to $643,000 in the second quarter of 2021. During the same period, the median price of a single-family detached home increased 24.3 per cent to $1,050,000, while the median price of a condominium increased 9.3 per cent to $500,500.

"Real estate, like many other economic drivers, is cyclical," said St-Pierre. "This record home price appreciation period was spurred by an unprecedented health crisis. The return to more moderate appreciation rates will occur naturally as the economy regains balance and people develop post-pandemic consumer habits."

Royal LePage is forecasting that the aggregate price of a home in the Greater Montreal Area will increase 17.5 per cent in the fourth quarter of 2021, compared to the same quarter last year, the highest of all forecasted regions in the country. The previous forecast, released in April, 2021, has been revised upward to reflect the current state of the market.

"The second half of the year should post a more moderate growth than what we have seen in the first half of 2021," concluded St-Pierre.

Royal LePage House Price Survey Chart: rlp.ca/house-prices-Q2-2021
Royal LePage Forecast Chart: rlp.ca/market-forecast-Q2-2021

Greater Vancouver 

The aggregate price of a home in Greater Vancouver increased 19.6 per cent year-over-year to $1,202,500 in the second quarter of 2021. Broken out by housing type, the median price of a single-family detached home increased 24.9 per cent to $1,625,000, while the median price of a condominium increased 9.4 per cent to $700,000 during the same period.

"While inventory is up slightly and demand seems to be decreasing heading into the summer months, Vancouver is still experiencing a seller's market," said Randy Ryalls, general manager, Royal LePage Sterling Realty. "Although not at the levels seen in April, competition remains high and continues to put upward pressure on prices. This is especially true in the single-family segment, where demand from local move-up buyers is strong."

In the city of Vancouver, the aggregate price of a home increased 11.5 per cent year-over-year to $1,305,000 in the second quarter of 2021. During the same period, the median price of a single-family detached home increased 14.6 per cent to $2,350,000, while the median price of a condominium increased 4.4 per cent to $774,000.

Ryalls added that the market may see some relief in the summer, as widespread buyer fatigue sets in and health restrictions are lifted.

"I expect many Canadians will take advantage of the country's reopening in the coming months, creating a bit of breathing room in the housing market. That's normal for this time of year, but the fall will likely be another busy and competitive time to buy a property," noted Ryalls.

Royal LePage is forecasting that the aggregate price of a home in Greater Vancouver will increase 15.0 per cent in the fourth quarter of 2021, compared to the same quarter last year. The previous forecast, released in April, 2021, has been revised upward to reflect the current state of the market.

Royal LePage House Price Survey Chart: rlp.ca/house-prices-Q2-2021
Royal LePage Forecast Chart: rlp.ca/market-forecast-Q2-2021

Ottawa

The aggregate price of a home in Ottawa increased 26.9 per cent year-over-year to $718,000 in the second quarter of 2021. Broken out by housing type, the median price of a single-family detached home increased 31.2 per cent to $846,250, while the median price of a condominium increased 16.9 per cent to $421,000 during the same period.

"The supply of homes is increasing and properties are staying on the market a little longer, compared to the height of activity earlier this year, allowing buyers a bit more time to consider their purchase," said Jason Ralph, managing partner, Royal LePage Team Realty. "But demand remains high and I don't expect we'll be in a balanced market anytime soon."

Ralph noted that the Ottawa real estate market, like many in Canada, is cyclical. He expects another wave of strong demand in the fall, when the new school year begins.

"I anticipate a steady flow of inventory over the summer," continued Ralph. "With many potential buyers not able to transact due to high competition and being priced out of multiple-offer scenarios, I expect this fall will bring a rush of buyers back to the market, even more than in years past."

Royal LePage is forecasting that the aggregate price of a home in Ottawa will increase 17.0 per cent in the fourth quarter of 2021, compared to the same quarter last year. The previous forecast, released in April, 2021, has been revised upward to reflect the current state of the market.

Royal LePage House Price Survey Chart: rlp.ca/house-prices-Q2-2021
Royal LePage Forecast Chart: rlp.ca/market-forecast-Q2-2021

Calgary

The aggregate price of a home in Calgary increased 9.7 per cent year-over-year to $568,500 in the second quarter of 2021. Broken out by housing type, the median price of a single-family detached home increased 10.4 per cent to $638,000, and the median price of a condominium increased 4.1 per cent to $226,000 during the same period.

"Spring demand has continued into the summer. Inventory selection has improved and the pipeline of buyers who weren't successful purchasing earlier this year have come back," said Corinne Lyall, broker and owner, Royal LePage Benchmark. "While we are seeing a healthy amount of new listings, it's still below two and a half months of supply and homes in the entry-level segment are very competitive."

Lyall added that an increase in competition is coming from buyers relocating from large Canadian cities where home prices are now out of reach.

"We have not seen this many buyers from Toronto since 2014. Young couples and professionals are attracted to Calgary's affordable real estate, lifestyle and access to the great outdoors. It's a great city to work and raise a family in," said Lyall. "The cost of a typical family home in Toronto can buy a beautiful home in an established Calgary neighbourhood."

Royal LePage is forecasting that the aggregate price of a home in Calgary will increase 7.5 per cent in the fourth quarter of 2021, compared to the same quarter last year. The previous forecast, released in April, 2021, has been revised upward to reflect the current state of the market.

Royal LePage House Price Survey Chart: rlp.ca/house-prices-Q2-2021
Royal LePage Forecast Chart: rlp.ca/market-forecast-Q2-2021

Edmonton

The aggregate price of a home in Edmonton increased 11.3 per cent year-over-year to $430,000 in the second quarter of 2021. Broken out by housing type, the median price of a single-family detached home increased 16.1 per cent to $467,000 and the median price of a condominium increased 12.9 per cent to $201,000 during the same period.

"The shift in demand remains towards value and it's putting significant upward pressure on home prices in Edmonton's suburbs and neighbouring communities. Purchases made during the pandemic tend to prioritize space to increase quality of life while at home," said Tom Shearer, broker and owner, Royal LePage Noralta Real Estate. "However, as the city-centre comes back to life, restrictions are lifted and pandemic fears subside, we expect buyers to return to the vibrant downtown core."  

Shearer added that condominiums located in the heart of the city have exceptional value. With students coming back in the fall, the region should expect increased demand from investors looking to buy rental units.   

Looking to the remainder of the year, Shearer anticipates high demand in the current market to spur summer sales.

"Real estate activity in Edmonton has not been this brisk in 15 years. Buyers who have not been able to find what they are looking for or who have not been successful with offers are hoping that the summer months will be less competitive," said Shearer.

Royal LePage is forecasting that the aggregate price of a home in Edmonton will increase 7.0 per cent in the fourth quarter of 2021, compared to the same quarter last year. The previous forecast, released in April, 2021, has been revised upward to reflect the current state of the market.

Royal LePage House Price Survey Chart: rlp.ca/house-prices-Q2-2021
Royal LePage Forecast Chart: rlp.ca/market-forecast-Q2-2021

Halifax

The aggregate price of a home in Halifax increased 26.6 per cent year-over-year to $462,000 in the second quarter of 2021. Broken out by housing type, the median price of a single-family detached home increased 26.4 per cent to $529,000, while the median price of a condominium increased 23.2 per cent to $379,500 during the same period.

"Towards the second half of the quarter, we started to see a slight lift in inventory and while homes continue to receive multiple offers, they are more likely to see five or six and not 30," said Matt Honsberger, broker and owner, Royal LePage Atlantic. "Halifax remains a seller's market but for those looking for homes priced over $750,000, they are finding less competition with improved selection compared to earlier this spring."

Honsberger added that the most competitive segment is suburban homes, where well-priced listings in popular neighbourhoods are attracting significant attention and selling quickly. 

Royal LePage is forecasting that the aggregate price of a home in Halifax will increase 9.5 per cent in the fourth quarter of 2021, compared to the same quarter last year. The previous forecast, released in April, 2021, has been revised modestly upward to reflect the current state of the market.

Royal LePage House Price Survey Chart: rlp.ca/house-prices-Q2-2021
Royal LePage Forecast Chart: rlp.ca/market-forecast-Q2-2021

Winnipeg

The aggregate price of a home in Winnipeg increased 16.9 per cent year-over-year to $352,000 in the second quarter of 2021. Broken out by housing type, the median price of a single-family detached home increased 18.9 per cent to $390,750 in the second quarter of 2021, while the median price of a condominium increased 15.2 per cent to $242,000 during the same period.

"Winnipeg home price gains are up double-digits but it's important to note that the gains are still considerably lower than the national average," said Michael Froese, broker and manager, Royal LePage Prime Real Estate. "Compared to other urban centres in Canada, Winnipeg remains an affordable city where people can pay their mortgage and not sacrifice on other major purchases."

Froese added that, similar to the rest of the country, activity towards the end of the quarter was more muted than April and May. This is attributed to buyer fatigue, lack of inventory selection and a desire to enjoy the summer after a challenging year dealing with the pandemic. 

"While activity has dipped slightly as we head into the summer, inventory is not arriving fast enough to provide relief to potential buyers. Until we see supply levels rise, prices will continue to go up," Froese added. "Inventory in the detached segment is down significantly and new listings are scarce."

Froese said that the lift in condo prices reflects first-time buyers purchasing condominiums after struggling to purchase detached homes.

"Younger buyers are seeing prices go up and low inventory. They want to get on the real estate ladder and condos offer the opportunity of better selection, good locations and a very affordable price point," said Froese. "In our current real estate market, buyers are realizing it's better to be in the market than not at all."

Royal LePage is forecasting that the aggregate price of a home in Winnipeg will increase 8.5 per cent in the fourth quarter of 2021, compared to the same quarter last year. This forecast is consistent with the company's previous update in April, 2021.

Royal LePage House Price Survey Chart: rlp.ca/house-prices-Q2-2021
Royal LePage Forecast Chart: rlp.ca/market-forecast-Q2-2021

Regina

The aggregate price of a home in Regina increased 8.2 per cent year-over-year to $342,000 in the second quarter of 2021. Broken out by housing type, the median price of a single-family detached home increased 9.3 per cent to $365,000, while the median price of a condominium increased 5.5 per cent to $196,500 during the same period.

"Following a very busy first quarter, the Regina real estate market is beginning to show signs of becoming balanced, with inventory at near normal levels," said Mike Duggleby, broker and owner, Royal LePage Regina Realty. "The weather does have an impact on activity, so the hot summer months will cool demand, at least temporarily, but will not affect prices."

Duggleby noted that while competition remains strongest in the single-family detached segment, condominium demand is beginning to ramp up, and expects that will continue to grow in the fall.

"We haven't reached pre-pandemic levels yet, but it's obvious demand is building in the condo market. The return of foreign students to Regina ahead of the new school year will only add to the growing demand in this segment of the market," said Duggleby.

Royal LePage is forecasting that the aggregate price of a home in Regina will increase 9.0 per cent in the fourth quarter of 2021, compared to the same quarter last year. The previous forecast, released in April, 2021, has been revised upward to reflect the current state of the market.

Royal LePage Home Price Data:

Royal LePage House Price Survey Chart: rlp.ca/house-prices-Q2-2021
Royal LePage Forecast Chart: rlp.ca/market-forecast-Q2-2021

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About the Royal LePage House Price Survey

The Royal LePage House Price Survey provides information on the most common types of housing, nationally and in 62 of the nation's largest real estate markets. Housing values in the Royal LePage House Price Survey are based on the Royal LePage Canadian Real Estate Market Composite, produced quarterly through the use of company data in addition to data and analytics from its sister company, RPS Real Property Solutions, the trusted source for residential real estate intelligence and analytics in Canada. Commentary on housing and forecast values are provided by Royal LePage residential real estate experts, based on their opinions and market knowledge.

During the second quarter of 2021, the company revised its House Price Survey methodology, including geographical boundaries and housing types. Royal LePage's aggregate prices are calculated using a weighted average of the median values of all housing types collected. This improves accuracy as surges of transactions in the upper end or lower end of the real estate market are less likely to skew results.

About Royal LePage

Serving Canadians since 1913, Royal LePage is the country's leading provider of services to real estate brokerages, with a network of over 18,000 real estate professionals in over 600 locations nationwide. Royal LePage is the only Canadian real estate company to have its own charitable foundation, the Royal LePage Shelter Foundation, dedicated to supporting women's and children's shelters and educational programs aimed at ending domestic violence. Royal LePage is a Bridgemarq Real Estate Services Inc. company, a TSX-listed corporation trading under the symbolTSX:BRE. For more information, please visit www.royallepage.ca.

SOURCE Royal LePage Real Estate Services

Meghan Edwards, North Strategic on behalf of Royal LePage, [email protected], [phone]