Waiting for the BoC to cut rates may be keeping a lid on prices too
In typical market conditions, we would be in the midst of a buoyant Canadian housing market with high demand boosting prices. But 2024 is not typical.
With continued uncertainty about the Canadian economy and – for the housing market – whether mortgage rates will be eased by the start of interest rate cuts by the Bank of Canada, the spring housing market is sluggish and price rises are on hold.
The latest seasonally adjusted reading of the Teranet-National Bank Composite House Price Index which covers the 11 largest CMAs, reveals stable prices in April following two monthly gains. Edmonton, Montreal, and Calgary all saw month-over-month gains and there were sub-1% gains for Ottawa-Gatineau, Vancouver, Hamilton, and Winnipeg. But Quebec City (-2.1%), Victoria (-1.9%), Toronto (-1.2%), and Halifax (-0.7%) posted declines.
“This stabilization comes as resale market activity remains sluggish in the spring, with first-time homebuyers possibly on the sidelines awaiting possible interest rate cuts from the Bank of Canada by summer. Weakness is particularly noticeable in the country’s largest city, Toronto, where the job market has deteriorated significantly in recent months (unemployment rate now 7.9% vs. 5.6% a year earlier),” the report states.
However, there is cautious optimism that population growth, limited supply, and rate cuts will all push prices higher later in the year.
Buyers on the sidelines
For now, the market remains constrained with the Canadian Real Estate Association reporting that Canadian home sales dipped in April 2024 when compared to March, even as the number of properties available for sale rose to kick off the spring market.
Year-over-year there was improvement in activity although this is likely partly due to the timing of the long Easter weekend this year.
“April 2023 was characterized by a surge of buyers re-entering a market with new listings at 20-year lows, whereas this spring thus far has been the opposite, with a healthier number of properties to choose from but less enthusiasm on the demand side,” said Shaun Cathcart, CREA’s Senior Economist.
James Mabey, newly appointed Chair of CREA’s 2024-2025 Board of Directors, set a positive tone, noting that the market is the most balanced it’s been nationally since pre-pandemic.
“Mortgage rates are still high, and it remains difficult for a lot of people to break into the market but, for those who can, it’s the first spring market in some time where they can shop around, take their time and exercise some bargaining power,” he said.
