Rate cuts could herald beginning of an upsurge – but are buyers already stepping off the sidelines?
Canada’s housing market is due an uptick in 2024 after a subdued couple of years – but when might a resurgence gather pace?
Many observers view the possible onset of rate cuts by the Bank of Canada as the likely starting point for an uptick in market activity, although surprisingly strong jobs figures revealed last week may have pushed the central bank’s timeline for cuts later into the year.
Analysts, including RBC Economics, believe that with rate cuts unlikely until the middle of 2024 at the earliest, the national housing market is likely to remain subdued until then. Still, some evidence suggests many buyers aren’t waiting to make a move – including a spike in year-over-year sales activity in the Greater Toronto Area (GTA) in January.
Sales in the region rocketed by 37% compared with the prior January, according to Toronto’s regional real estate board, and posted a huge 22.9% increase compared with December.
Victor Tran (pictured top), a mortgage and real estate expert with RATESDOTCA, told Canadian Mortgage Professional that busy activity at the beginning of the year showed buyers’ eagerness to enter the market before rates fall and demand potentially jumps.
“I feel like the market is kind of heating up. There has always been a lot of pent-up demand, lots of buyers that are just standing on the sidelines, getting tired of waiting,” he said. “And they’re leaving the sidelines and entering the market before rates do drop.
“Once the Bank of Canada makes that first rate drop, it’s going to have a lot of buyers in a flooded market, and some of the buyers that have been ready to purchase basically want to just get ahead of the gun and make a move before it’s too late and all of these bidding wars start.”
The Toronto Regional Real Estate Board (TRREB) unveils its 2024 Market Outlook and Year in Review report, forecasting an upswing in the Greater Toronto Area (GTA) housing market. https://t.co/KVJ3ZWMg5G#mortgageindustry #housingmarket #affordability #supplyanddemand
— Canadian Mortgage Professional Magazine (@CMPmagazine) February 12, 2024
Where are home prices headed?
A curious feature of the current market is that despite a brisker clip of homebuying, prices aren’t starting to surge again. In January, the average price across all home types in the GTA slipped by 1% year over year, and fell by even further – 5.4% – over December.
Tran said that despite anecdotal evidence of multiple bids on properties in Toronto, particularly those listed low, he’s seen little sign of prices spiralling several times above the listed value as occurred at the height of the COVID-19 pandemic market boom.
That can only be a positive trend for the market, he said, with little prospect of price growth accelerating to an unsustainable pace in the GTA by the end of this year.
“The successful buyers, it’s not like they’re overpaying. That’s a good sign,” he said. “I feel like sales activity will definitely increase, so we’ll see more sales this year compared to last year in terms of volume and units sold.
“But I don’t think – and this is just a prediction of mine – that house prices will increase significantly. If anything, they’ll just kind of remain flat, maybe a less than 5% increase. Time will tell, but activity will definitely increase. There are just so many buyers that are waiting right now for opportunities.”
New inventory could keep home prices steady
Supply-demand conditions remained tight in January as prospective sellers stayed cautious across Canadian housing markets – but mortgage renewal payment shocks could trigger a “wave” of distressed sales as the year progresses, according to RBC Economics’ latest housing market report.
The prospect of further inventory coming to the housing market is another reason prices are unlikely to shoot through the roof, according to Tran.
“I don’t think it will get out of control. And I think come spring and summer, we’ll definitely see more inventory,” he said. “There were a lot of terminated listings last year and I think a lot of those sellers may return to the market. So hopefully that will fill the demand, and that will pretty much stabilize prices.
“More supply should help that demand, and it doesn’t necessarily mean the prices will skyrocket again. So I think it’ll be a fairly flat year – but from what we learned in the past couple of years, it doesn’t really take much to change the market.”
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