CashNews.co
Real estate brokerage firm Royal LePage expects home prices to increase six per cent annually by the end of 2025, according to its annual market survey forecast released Wednesday, with prices set to climb across all major markets as more buyers come off the sidelines amid lower interest rates.
The 2025 survey found that the aggregate price of a home – calculated using a weighted average of the median value of all housing types – will rise six per cent annually by the fourth quarter of 2025 to $856,692. The aggregate price of a home is estimated to be $808,200 in the fourth quarter of this year. The report also says that the median price of a detached home is expected to increase seven per cent annually by the fourth quarter of 2025, from $841,900 this year to $900,833. Condominium prices are expected to rise at a more moderate pace, with prices set to increase 3.5 per cent annually over the same timeframe from $585,500 to $605,993.
The Canadian real estate market has been in a slump since reaching a peak in 2022, as the Bank of Canada rapidly hiked its benchmark interest rate in the wake of soaring inflation. While the central bank has now embarked on a loosening cycle, cutting its benchmark rate in four consecutive decisions since June, the lower rates did not immediately bring prospective buyers off the sidelines. Royal LePage says that has started to change, with activity picking up in October, the same month that the central bank announced a jumbo-sized 50 basis point rate cut.
“After several years of unusual volatility in the real estate market, key indicators point to a return to stability in 2025. The backlog of willing and able buyers continues to grow, and upcoming changes to mortgage lending rules will further enhance Canadians’ borrowing power,” Royal LePage president and chief executive officer Phil Soper said in a news release, noting that the Bank of Canada rate cuts have “taken time to influence buyer behaviour.” The central bank will issue its final interest rate decision of the year on Dec. 11.
“We saw a marked increase in market activity at the start of the fourth quarter, following the Bank of Canada’s 50 basis point rate cut. Buyers now believe home prices have hit bottom and are eager to act before competition intensifies.”
The federal government’s mortgage policy changes that go into effect this month are also expected to help spur activity in the housing market. The measures, first announced in September, include increasing the cap on insured mortgages to $1.5 million from $1 million, which will reduce the minimum downpayment required to purchase a home between $1 million and $1.5 million. Royal Lepage noted that this measure will be especially helpful for homebuyers in Canada’s priciest real estate markets – namely Toronto and Vancouver – where average home prices are above the $1 million mark.