GTA markets holding their own as home price growth slows across Canada

Home price growth across Canada is slowing due to short-term challenges, but GTA markets are still among the best performing in the country.

According to the Royal LePage House Price Survey for the second quarter of 2022, the aggregate price of a home in Canada increased 12.1 per cent year-over-year to $815,000. On a quarterly basis, the aggregate price of a home in Canada decreased 4.9 per cent in the second quarter, after reaching record year-over-year highs in Q1. This is reflective of softening home prices in markets that saw exceptional price growth during the pandemic. The second quarter of 2022 is the first quarter in more than three years (since Q1 2019) to post a quarter-over-quarter decline in home prices.

Royal LePage is forecasting that the aggregate price of a home in Canada will increase 5.0 per cent in the fourth quarter of 2022, compared to the same quarter last year. The forecast has been revised downward from the previous quarter following more aggressive than expected interest rate hikes by the Bank of Canada, resulting in an expected temporary drop in demand in parts of southern Ontario and British Columbia.

“Some of the heat that was driving the market cooled during the quarter, as rising interest rates, coupled with economic uncertainty, undermined consumer confidence and pushed buyers to the sidelines,” says Phil Soper, president and CEO of Royal LePage. “We have significantly reduced our outlook for 2022, however home prices are still forecast to end the year higher than 2021 and well above pre-pandemic norms.

“Following record price gains across the country, numerous markets in southern Ontario and parts of Greater Vancouver – specifically those that saw some of the highest price appreciation over the last two years – experienced a second quarter decline. I expect this highly unusual downward movement in home values will be short-lived, as the country’s chronic housing shortage has not been resolved.”

Soper adds that barring a sharp increase in the inventory of properties for sale, which seems unlikely given our exceptionally low level of unemployment, growing population and low rate of mortgage default, the second quarter produced most of the price declines expected in this cycle.

The national median price of a single-family detached home rose 12.4 per cent year-over-year to $859,500, according to the Royal LePage National House Price Composite. The median price of a condo increased 12.2 per cent to $589,000.

“We don’t expect to see much movement in housing values through the balance of the year,” says Soper. “Canada is experiencing strong growth in household formation, so positive economic news, such as a signal that rates have reached a level where inflation can be managed, should trigger a return to rising property values. The small percentage of consumers who purchased properties at 2022’s February/March peak will have seen a short-term decline in the value of their homes, but there is little doubt they will soon make up that lost ground.”

Royal LePage cautions to policy-makers who may see growing inventory as a sign that Canada’s housing supply crisis has become less urgent compared to election periods when Canadians from coast to coast expressed concern and sought action to improve the supply of housing.

“Although demand has temporarily weakened, Royal LePage is concerned that this short-term reprise from rapidly rising home prices may cause decision makers to shift their attention to other issues, thinking Canada’s housing supply crisis can wait – it cannot,” says Soper. “The current market correction will create pent-up demand. A growing domestic buyer pipeline, coupled with the need to house hundreds of thousands of new Canadians, threatens to far outstrip the tepid pace of new home construction.”

Greater Toronto Area

The aggregate price of a home in the GTA increased 12.8 per cent year-over-year to $1.16 million in the second quarter of 2022. On a quarterly basis, the aggregate price of a home in the GTA decreased 8.1 per cent in the second quarter, after reaching record year-over-year highs in Q1. This is the first quarterly decline in the region since Q1 of 2018.

Broken down by housing type, the median price of a single-family detached home increased 10.5 per cent to $1.4 million, while the median price of a condominium increased 17.3 per cent year-over-year to $738,800 in the second quarter of 2022.

In Toronto, the aggregate price of a home increased 11.7 per cent year-over-year to $1.2 million in the second quarter of 2022. Single-family detached homes increased 9.3 per cent to $1.6 million, while condos increased 6.8 per cent to $742,600.

Royal LePage is forecasting that the aggregate price of a home in the GTA will increase 3.0 per cent in the fourth quarter of 2022, compared to the same quarter last year. The previous forecast has been revised downward as a result of softening demand due to aggressive interest rate hikes by the Bank of Canada.