Resales dip and price trends remain mixed across regions
The Canadian housing market's recovery is anticipated to be gradual rather than immediate, according to a new analysis by Royal Bank of Canada (RBC).
Bank economist Rachel Battaglia said significant interest rate reductions would be needed to substantially affect home purchase costs, particularly in the country’s more expensive markets.
While further cuts may eventually boost homebuyer demand, a more noticeable improvement might not emerge until the end of 2024 and into the following year, Battaglia wrote. This slow pace reflects a market still struggling to rebound from previous downturns, despite recent policy efforts.
Market struggling despite rate cut
Canada’s housing market has shown little response to the latest interest rate cut at the end of July. National home resales experienced a modest decline of 0.7% between June and July, partially offsetting the 3.5% gain recorded in June. This stagnation highlights the ongoing challenges in the market.
Key Points:
- Resale activity dips: The downturn in July's resale activity was largely concentrated in Ontario and British Columbia despite a solid performance in June.
- Regional variations: Contrasting with the national slowdown, the Prairie provinces have seen robust activity, with cities like Calgary, Edmonton, and Saskatoon hitting historically high levels.
- Market softness in major cities: In Canada's priciest markets, Toronto and Vancouver, buyers maintained a wait-and-see approach, keeping activity levels akin to those in March. Meanwhile, secondary cities such as Hamilton-Burlington, Ottawa, Guelph, and Kitchener-Waterloo in Ontario, alongside Victoria and the Okanagan in BC, reported a second consecutive monthly increase in sales.
- Inventory levels rise: July saw a surge in new listings, reaching a 10-month high, particularly noticeable in Ontario’s Greater Toronto Area (GTA) and in BC’s Vancouver and the Fraser Valley.
- Price trends: Overall home prices remained stable with a slight 0.2% month-over-month increase in July, the highest this year. However, the trends varied significantly across regions, with Quebec and the Prairies experiencing price increases due to tight supply-demand conditions, while Toronto and Vancouver saw potential softening amid rising inventories.
The market's sluggish pace and regional disparities in activity and price trends suggest a complex path to recovery, influenced by potential future interest rate cuts.
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