New data from Royal LePage released today shows that the aggregate home prices in Canada decreased 2.8% year over year to $757,100.
This marks the first year-over-year drop in quarterly prices since the end of 2008, during the global financial crisis. On a quarter-over-quarter basis, the aggregate price of a home in Canada decreased 2.3%. This is the third consecutive quarterly decline, and the smallest decrease so far.
“Canada’s housing market closed out 2022 much as expected,” said Phil Soper, president and CEO of Royal LePage. “Activity levels were down sharply compared to the hyper-charged state we experienced during the pandemic, with home prices flattening or showing modest declines.
"While the red-hot market conditions are behind us, there remains a widespread shortage of homes in Canada that cannot be offset by temporarily cooling demand. Many sidelined buyers are waiting patiently for the bottom to be revealed. Once interest rates stabilize and consumers adapt to their new normal, many of today’s sidelined buyers will be back – sooner than many analysts are predicting.”
When broken out by housing type, the national median price of a single-family detached home declined 3.7% year-over-year to $781,900, while the median price of a condominium increased 1.4% year-over-year to $561,600.
Richmond Hill homes
Prices peaked in the first quarter of 2022 in most -- but not all -- provinces. Within provinces, prices peaked at different times in different regions and neighbourhoods. Interestingly, the price of condominiums peaked much later in the year than detached homes.
Royal LePage notes that quarterly comparisons by market are a fairer and more accurate representation of the change in housing values. “That said, by mid-2022, it had become common for market watchers to reference ‘declines from the peak price’ as a means of supporting the narrative that home prices were crashing,” reads the report. According to the company, fewer than 113,000 resale transactions took place in the months of February and March, when the highest national benchmark prices were recorded, representing just 0.68% of all residential dwellings in the country.
The brokerage goes on to say that some of the dramatic real estate headlines that speak to the country’s drop in prices throughout 2022 have been overblown. “It may be headline-grabbing to say that prices are down by double digits, yet well less than 1% of property owners completed their purchases in February or March of last year, when the pandemic-driven urgency to buy and serious housing supply shortages came together to create a final spike in prices,” said Soper. “Over time, Canadian homeowners have benefited greatly from real estate appreciation.”
Although home prices were down modestly on a year-over-year basis in the final quarter of 2022, the report emphasizes that prices in the fourth quarter of 2021 were close to their peak, and home prices across the country remain well above pre-pandemic levels. In the fourth quarter of 2022, the aggregate price of a home in Canada recorded an increase of 13.8% over the same period in 2020, and 17.2% cent over the same period in 2019.
So, while the red-hot, frenzied market of the pandemic may have dialled back its drama, the reality remains that Canada’s home prices are still incredibly high -- not that any would-be first-time homeowner needs the reminder.
Royal LePage highlights several important factors that will continue to support home prices in Canada: high levels of employment, strong household savings, and growing household formation, both organically from our millennial and older Generation Z cohorts, and through record immigration rates.
“While demand has slowed in this rising interest rate environment, we know that many families waiting on the sidelines have the capacity to buy and have chosen not to, waiting for conditions to stabilize. Soon enough, these buyers will return to the market and will be met, once again, with the realities of low inventory and much competition,” noted Soper.
In December, Royal LePage issued its 2023 Market Survey Forecast, projecting that the aggregate price of a home in Canada will decrease a modest 1% in the fourth quarter of 2023, compared to the same quarter in 2022.