9/10/2024
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Posted in Canadian Housing Market by Vanguard Realty | Back to Main Blog Page
While the Bank of Canada may be lowering interest rates, the move is not having an immediate effect on Canada‘s housing market, an economist at one of Canada’s biggest banks says.
“Markets’ reaction so far has been largely muted,” Royal Bank of Canada (RBC) Assistant Chief Economist Robert Hogue wrote in a recent blog post for the bank’s Thought Leadership Team.
“Early reports on August home sales showed only small increases from July in most markets, including Vancouver, Calgary, Edmonton, Toronto and Montreal. These came on the heels of mixed results in June and July. It will clearly take deeper rate cuts to stimulate demand in a material way, as buyers continue to contend with high ownership costs and poor affordability.”
Last week the Bank of Canada cut its key lending rate for the third time in a row, bringing the rate down to 5.25 per cent as inflation showed signs of coming under control. Bank of Canada Governor Tiff Macklem said he may adjust the pace of interest rate cuts if called for going forward – either slowing or speeding them as needed.
Hogue said the biggest trend this year has been a rise in listings.
“In some cases, such as in Toronto, it reflects the completion of many newly built units (mainly condos) that owners (mainly investors) are looking to offload,” he wrote. “In other cases, it could be sellers betting lower rates will spur buyer interest and improve sale outcomes. In some, it may be a sign of homeowner distress arising from high rates.”
He said the balance between supply and demand is easing, tipping in favour of buyers in Toronto, especially in the condo market.
Prices in most markets have “stayed essentially flat” since spring, Hogue noted. He forecast that trend would likely continue in the interim unless there are larger rate cuts to drive up demand.
The number of home sales in Toronto has essentially been “standing still,” Hogue wrote, noting that the GTA market saw 62,000-63,000 home resales in July and August – very similar numbers to 2022 and 2023.
“Potential buyers are still hunkered down, waiting for better deals on either price or interest rates (or both),” Hogue wrote. “A sharp rise in listings this year may have resolved severe inventory shortages that prevailed earlier but so far failed to unlock the market.”
He noted that home resales for July and August were up just 0.6 per cent on a seasonally adjusted basis, but were still down 32 per cent from pre-pandemic levels.
GTA home resales piqued in March 2021, when close to 143,000 homes were resold in the market.
Home prices were unchanged in July and August, sitting at an average of $1.09 million – a price Hogue noted is still out of reach for many would-be buyers.
“Affording what remain very high price points is the main challenge for buyers. Even the relatively cheaper categories like condo apartments (the average price of which is running closer to $668,000 in the region) are out of reach for many,” he wrote. “This leaves the market in a standstill. Sellers are holding firm on their asking price and buyers feel no urgency (or are unable) to bid.”
In the current environment, Hogue said, sellers may be willing to make some concessions in transactions, especially in the condo market.
However he predicted that sales momentum will “build gradually” in the period ahead as rates continue to fall and as a wave of new condos are completed.
Source: CTV
GTA Condo Market, GTA Home Sales, GTA News, GTA Real Estate Market, Toronto Real Estate
