Miniature House on A Financial Graph
iStock

Real estate brokerage Royal LePage is cutting its expectations for the growth in home prices this year after it says prices in the second quarter fell compared with the first three months of the year.

Royal LePage says it now expects the aggregate price of a home in Canada in the fourth quarter of this year will be up 5.0% compared with the same quarter in 2021.

The forecast is down from an April estimate for a 15% year-over-year increase for the fourth quarter.

It says it lowered the forecast 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.

In its house price survey, Royal LePage says the aggregate price of a home in Canada in the second quarter was $815,000, up 12.1% compared with a year ago. However, it was down 4.9% compared with its record high in the first quarter of this year.

Royal LePage says it was the first quarter in more than three years to post a quarter-over-quarter decline in home prices.

“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,” Royal LePage CEO Phil Soper said in a statement.

“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.”