Canada’s housing market is on the verge of a comeback after a tough year, thanks to a strategic interest rate cut by the Bank of Canada. This led to a 3.7 per cent increase in national home sales compared to May. While the market is showing signs of life after months of decline, there are still uncertainties and challenges ahead for industry professionals, buyers, and sellers.
But will this interest rate cut be enough? Is it the beginning of a cutting cycle? Will things get worse before they get better? We delve into the factors shaping the recovery of Canada’s real estate landscape, including economic policy, consumer sentiment, and regional differences.
Managing expectations around interest rate cuts to attract buyers
Expectations for interest rate cuts this year have been tempered since April, as the market has seen an influx of properties with many sellers listing their homes in the spring. However, buyer activity and consumer sentiment remain low.
Gradually lowering interest rates is expected to entice buyers back into the market. Nevertheless, the slow spring market and increasing supply levels have led to a downward revision in sales and average home price projections.
26% more listings compared to last June but below historical average
In 2024, an estimated 472,395 residential properties are set to be sold, a 6.1 per cent increase from 2023. The total average home price is projected to rise by 2.5 per cent to $694,393.
Looking ahead to 2025, home sales are expected to rise by 6.2 per cent to 501,902 units, driven by declining interest rates and returning demand. The national average home price is forecasted to increase by 5 per cent to $729,319.
By the end of June, there were approximately 180,000 properties listed for sale, a 26 per cent improvement from the previous year but still below the historical average of around 200,000 sales by this month.
Potential slowdown in inventory buildup, moving towards balanced market conditions
New listings saw a modest 1.5 per cent month-over-month increase, while the MLS Home Price Index (HPI) inched up by 0.1 per cent from May 2024. Despite these small gains, the HPI was down 3.4 per cent year-over-year, and the national average sale price decreased by 1.6 per cent compared to June 2023.
By the end of June, the supply of properties had increased by 26 per cent from the previous year but remained below the historical average, indicating a possible slowdown in inventory buildup. The national sales-to-new listings ratio improved to 53.9 per cent in June from 52.8 per cent in May, approaching the long-term average of 55 per cent and signaling balanced market conditions.
Fluctuating housing prices
Housing prices vary regionally. Calgary, Edmonton, Saskatoon, Montreal, and Quebec City have seen price increases since early last year, while Ontario and Nova Scotia have experienced recent price hikes since late last year.
Despite this, the non-seasonally adjusted National Composite MLS HPI remains 3.4 per cent lower than June 2023 levels, reflecting the significant price spikes in spring and early summer of 2023. The national average home price in June was $696,179, down 1.6 per cent from the previous year.
Canada’s housing market in June 2024 is marked by cautious optimism and evolving dynamics. The initial signs of recovery spurred by the Bank of Canada’s interest rate strategy have set the stage for more cuts and anticipated growth in the years ahead.
With an expected 6.1 per cent increase in property sales this year and continued growth into 2025, there is a sense of anticipation as buyers’ and sellers’ expectations have more ground to cover. The market’s future hinges on overcoming challenges like rebuilding buyer confidence and managing the intricate balance of supply and demand. Looking forward, Canada’s housing market promises a mix of resilience, adaptation, and hopeful progress.
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