Toronto could soon become the most expensive place to buy a house in Canada.
That’s according to the Home Price Update and Market Forecast released Thursday by Royal LePage.
The updated forecast projects a 10 per cent increase in GTA aggregate home prices by the end of 2024, up from its original forecasted increase of six per cent at the start of the year, after a “stronger-than-expected” first quarter.
As a result, Royal LePage now predicts the aggregate price of a home in Toronto will surpass Greater Vancouver in the second half of the year.
Warm winter weather and anticipation of reduced interest rates from the Bank of Canada have “prompted some buyers who had been sidelined last year to re-enter the market with a renewed sense of purpose,” said Royal LePage COO Karen Yolevski in the report. That means increased competition while Toronto’s housing supply remains too low.
GTA prices are expected to increase more than any other jurisdiction this year, according to Royal LePage, followed by a projected eight per cent increase in Montreal.
The updated forecast comes out days after a report from brokerage Zoocasa reported the median housing cost in Toronto is now higher than in New York City, despite New York residents having the higher median income.
In the first quarter of 2024, GTA aggregate home prices rose 5.2 per cent, to $1,177,700. They are forecast to rise to $1,235,630 by the end of 2024. Royal LePage calculates the aggregate price using a weighted average of the median values of all housing types collected.
Home prices on the rise across Canada
Nationally, Royal LePage predicts the year-over-year increase in aggregate home prices will be nine per cent, up from an originally projected increase of 5.5 per cent.
“It is clear we are rapidly transitioning away from a buyers’ market and back to an environment where the seller has the upper hand,” said Royal LePage president and CEO Phil Soper in a news release.
The Royal LePage report cites high demand, low supply and an influx of new Canadians as the primary reasons for the nationally forecasted increase, as well as an acceptance from potential buyers that borrowing rates aren’t coming down any time soon.
“The market did reach a critical tipping point in the first quarter of 2024, when home prices bottomed out and began to appreciate again,” Soper said.
“Clearly, more and more buyers are motivated by the need to get ahead of rising home prices, rather than adopting the strategy of waiting for mortgage rates to fall.”
Ottawa, Bank of Canada addressing affordability
Some effort has been made at the federal level to keep housing prices down across the country.
The federal government recently announced it would work to reduce the number of temporary residents in Canada from 6.2 per cent to five per cent by 2027. And the Bank of Canada has held interest rates steady for months now, with the bank’s governor saying rates could start coming down as early as June.
The federal government is allowing longer mortgage repayment periods for first-time buyers with insured mortgages on newly built homes. Andrew Chang explores the pros and cons of 30-year amortization vs. the previous 25-year rule for prospective homeowners.
Deputy Prime Minister and Finance Minister Chrystia Freeland announced other affordability measures this week.
First-time home buyers will now be able to put more of their RRSP toward a deposit for a home and will have three more years to pay back the withdrawal. Additionally, first-time homeowners will soon have 30 years to pay off insured mortgages.