Any subsequent market recovery is likely to be gradual at first, it says
The observable struggle in demand-supply conditions is now pulling down property values, a trend that will likely extend into the first half of 2024, according to RBC Economics.
During the third quarter, RBC’s aggregate affordability measure for Canada spiked by 2.8 points to settle at 62.5%. This increase marked a reversal from the modest improvement registered in Q2.
RBC said that several markets, including Vancouver, Victoria, and Toronto, were grappling with near-record lows in affordability. Ottawa, Montreal, and Halifax were also found to be labouring under challenging affordability conditions.
“There’s a very long way to go before affordability is meaningfully restored,” RBC said. “Buyers in many of Canada’s large markets will contend with extremely difficult conditions for some time. We expect home resale activity to stay especially quiet in Ontario and British Columbia until interest rates fall materially.”
Any subsequent recovery is likely to be gradual at first.
“Buyers in other markets may respond more quickly to easing rates,” RBC said. “Those in the Prairies (including Calgary) still display strong confidence levels at this juncture.”
The Canadian federal government has introduced Bill C-56, the Affordable Housing and Groceries Act, as part of its efforts to boost housing supply and stabilize grocery prices.
— Canadian Mortgage Professional Magazine (@CMPmagazine) September 25, 2023
Read more: https://t.co/azsYLNM7rS#mortgageindustry #affordability #housingmarket #realestate
However, despite these prevailing challenges, RBC said that there are faint glimmers of optimism on the horizon.
“The good news is the latest bout of housing affordability deterioration has likely run its course and the third quarter will prove to be the cyclical-worst point for RBC’s affordability measure. We see the situation improving from now on as home prices drift lower or stabilize in the majority of markets, and household income continue to grow at a solid pace.”
RBC also anticipates that the Bank of Canada’s policy decisions to be a decisive factor in price dynamics.
“The trend will become even friendlier once the Bank of Canada starts cutting rates—around mid-year in our view,” RBC said.
