Modest growth in London area home prices, sales in 2025: Forecast

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London’s housing market is projected to pick up pace in 2025, but don’t expect a return to the craze of the pandemic years, a new forecast by realty giant ReMax suggests.

According to the forecast, the number of home sales for the London region that also takes in St. Thomas, Strathroy and portions of Elgin and Middlesex counties will increase by about 10 per cent.

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At the same time, home prices are projected to rise by about 4.5 per cent, bringing the average resale price of a property to about $671,000.

Both predictions for London are largely in line with what most Ontario markets will experience, thanks largely to lower interest rates and changes to amortization rules that allow first-time home buyers to get 30-year mortgage loans.

Though some sellers may be disappointed by the forecast after seeing double-digit gains during the COVID-19 years, when homes reached a record average selling price of about $825,000, home prices going up by 4.5 per cent is nothing to sneeze at, said Carl Vandergoot, broker and owner of ReMax Centre City Realty Inc in London.

“For many decades, we would see increases of two to three per cent a year, which was very normal in the housing market,” he said. “But what we’ve experienced in the past five years has not been normal at all.

“I do think we’re going to level back out to the prices we were at before, but that’s going to take some more time.”

After being one of the hottest markets in the country, home sales and prices in the London region dropped significantly after the Bank of Canada began raising interest rates in early 2022 as a way to fight runaway inflation.

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This year, however, the central bank has moved in the opposite direction, announcing cuts to its key lending rate – which impacts interest paid on mortgages, lines of credit and credit cards – in June, July, September and October.

Economists believe one more cut is in the cards when the bank announces its policy decision on Dec. 11.

“We think the Bank of Canada will move forward with a 25-basis point reduction, but there is still the chance it could cut by 50 basis points,” TD Bank economist Marc Ercolao said in the bank’s latest projections that came after Statistics Canada reported inflation rose by two per cent in October, up from September’s 1.6 per cent.

“The (Bank of Canada) is likely to view the inflation data as a minor setback,” Ercolao said.

“Inflation isn’t raising any red flags yet, but the report is a reminder that getting price growth to settle will take time.”

Though the impact of the recent interest rate cuts on the housing market hasn’t been as swift as some had expected, buyers’ confidence seems to be slowly growing.

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For instance, a total of 661 homes changed hands in October, 135 more than in the same month last year.

“We are already seeing an uptick in the amount of interest, but there’s still a lot of people who are sitting on the fence and kind of waiting to see how much further interest rates go down,” Vandergoot said, adding any increase in demand likely will be absorbed by the high number of properties now up for sale.

“We’re still going to be in a balanced market for most of 2025 because we have considerably more inventory than what we did during the COVID years,” he said.

“So, that is going to slow the increase of prices of houses, because we have more inventory, so buyers have more choice, and when there’s more choice, then people are more selective on how much they’re going to pay for a property.”

jjuha@postmedia.com

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