Sales increase as rate cuts encourage buyers in major cities
After months of muted activity, Canada’s housing market may be shifting gears as interest rate cuts fuel buyer demand and lift home sales across the country. RBC Economics reported a notable rise in home resales for October, with early data from local real estate boards showing strong gains in major cities from September levels.
This uptick followed a cumulative 125-basis-point cut by the Bank of Canada, which RBC analysts said was the catalyst many buyers had been waiting for.
A rise in inventory throughout the year has also opened up more options for buyers, adding another layer of motivation to enter the market. Yet even with more homes on the market, demand outpaced new listings in October, creating tighter conditions in several major cities.
In Toronto, Vancouver, and Victoria, markets that had previously been more favourable for buyers, the balance has now shifted, with sellers gaining more bargaining power.
The effect on prices, however, has been moderate so far. The MLS Home Price Index (HPI) stayed relatively stable in October, with only slight increases in Toronto and price declines year-over-year in Vancouver, Victoria, and Toronto. Calgary, Edmonton, and Montreal, meanwhile, solidified their positions as seller-favourable markets.
“October could mark an inflection point in Canada’s housing market recovery,” RBC’s assistant chief economist Robert Hogue and economist Rachel Battaglia wrote in a recent report.
With another 50-basis-point cut anticipated in December, alongside additional reductions in 2025, RBC believes momentum could continue, though affordability remains a concern.
“Still, the market’s ride could be bumpy considering how stretched affordability remains at this stage,” the economists said.
Recovery period
October brought a noticeable boost in Toronto’s market activity, with a 14% increase in resales from the previous month, marking the highest levels seen since January. While the uptick in inventory helped stabilize prices, condo prices remain under pressure due to a flood of new completions, which has boosted supply and given buyers in the condo market significant leverage. The condo benchmark dropped 6.1% from a year ago, while single-detached homes saw a smaller decline of 2.5%.
“Housing affordability is extremely strained in the Toronto area and will remain a major obstacle for many potential buyers,” RBC noted. “Lower interest rates, however, should bring some relief and keep the market’s recovery going in the period ahead.”
In Montreal, the recovery trend is accelerating, with resales growing over 6% in October after steady increases in the previous months. With listings unable to keep pace with sales, prices have seen moderate gains. Single-family homes sold for a median of $589,000 in October, an 8% rise from last year, while condo prices reached $414,000, up 5%.
Montreal’s market is on track to return to pre-pandemic sales levels in the coming months if the current momentum continues.
“We expect further measured appreciation in the coming months, as interest rate cuts heat up homebuyer demand,” Hogue and Battaglia said.
Read next: BC Real Estate Association sees sales momentum building into 2025
In Vancouver, October marked a notable shift, with home resales rising 22% month-over-month - the strongest performance in over a year. This surge brought Vancouver’s sales activity to a 17-month high, signaling a potential rebound after a lengthy period of tepid growth.
The market’s sales-to-new listings ratio crossed over the balanced 0.50 threshold, giving the market more stability and setting the stage for modest price appreciation.
Nevertheless, high inventory levels continue to weigh on prices in Vancouver, with the MLS composite HPI still 1.9% lower than it was a year ago.
Calgary’s housing market remained resilient in October, although it didn’t experience the same level of growth as other major markets. Home sales have remained about 50% above pre-pandemic levels, driven by steady demand.
The market remained firmly in sellers’ favour, with resale activity outpacing new listings for the first time since June, resulting in a slight tightening of market conditions. Price growth has started to slow, with annual gains moderating to 4.5%, the lowest rate in over a year.
“We see additional interest rate cuts in the coming months keeping demand and prices on the rise,” RBC economists said in the report.
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