Canada's housing market recovery to be gradual, says RBC
Royal Bank of Canada (RBC) expects Canada’s housing market recovery to be slow through the remainder of this year due to soft purchase activity, according to its latest monthly update.
Despite the Bank of Canada's first interest rate cut in four years, which brought some energy to the market in June, home resales remained within the range they've been since spring 2023. While sales picked up 3.7% from May, they are still 9% below pre-pandemic levels nationwide.
The increase was modest and spread across most markets, with only a few exceptions, including Winnipeg, Trois-Rivières, and St. John's. However, it wasn't enough to reverse earlier declines, leaving current activity weaker than a year ago.
The rise in sales could be attributed not just to lower interest rates but also to a rise in available properties. New listings have been increasing for the past six months, with notable jumps in the Fraser Valley (12.1%), Toronto (9.8%), and Vancouver (8.4%).
The increased inventory is contributing to a stabilization of housing prices. The national aggregate MLS Home Price Index has remained flat since spring, falling below year-ago levels. The HPI benchmark reached $717,700 (seasonally adjusted) in June, a 10-basis-point uptick from May.
Price trends are not uniform across the country. Prairie markets like Calgary and Edmonton continue to see strong price growth due to limited inventory and high demand. Prices in Ontario and British Columbia are largely stagnant, with affordability challenges remaining significant for buyers in these areas.
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While Toronto and Vancouver property values are still appreciating slightly, the Fraser Valley has seen a price drop of more than 5% since September.
“Additional interest rate cuts are poised to stimulate homebuyer demand across the country. But the boost will likely be incremental,” said RBC assistant chief economist Robert Hogue in the report. “We believe rates must come materially before they make a meaningful dent in ownership costs, especially in Canada’s most expensive markets.”
RBC predicts a slow housing market recovery for the rest of 2024, with a potential acceleration next year if both short- and long-term rates decrease substantially. The report also warned of potential renewed downward pressure on prices in Toronto if housing inventory continues to build significantly.
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