Canadians did not go on a home-buying spree after the Bank of Canada lowered its overnight rate on June 5 despite some initial expectations, according to the Royal LePage House Price Survey (HPS) released on Thursday. “Canada’s housing market is struggling to find a consistent rhythm, as the last three months clearly demonstrated,” said Phil Soper, president and CEO, Royal LePage. “Nationally, home prices rose while the number of properties bought and sold sagged; an unusual dynamic. The silver lining is inventory levels in many regions have climbed materially. This is the closest we’ve been to a balanced market in several years.” “This trend dominates activity in two of the country’s largest and most expensive markets, the greater regions of Toronto and Vancouver, where sales are down yet prices remain sticky. There are exceptions, in the prairie provinces and Quebec, low supply and tight competition persist.” Soper said following the rate cut, “some buyers raced to get a deal done ahead of an expected spike in demand. Yet, when that first cut finally occurred in early June, market response was tepid.” A change in monetary policy drives consumer behaviour in two important ways, said Soper. “Lower rates mean lower monthly payments, opening the door to some families previously shut out of the market. Secondly is the psychological signal broadcast to sidelined buyers that the tide is turning, and that market activity is about to pick up again,” he said. “Not surprisingly, the quarter-point cut to the bank rate didn’t substantially improve the affordability picture. As for consumer sentiment, our early year research indicated that only one in ten potential homebuyers would be motivated by a tiny rate drop. The tale the market tells as rate cuts get to the point of a material reduction in the cost of borrowing should be a very different one.” In a Leger survey conducted for Royal LePage earlier this year, 51% sidelined homebuyers said they would resume their search if interest rates reversed. Ten per cent said a 25-basis-point drop would prompt them to jump back into the market, 18% said they are waiting for a cut of 50 to 100 basis points, and 23% said they need to see a cut of more than 100 basis points before they will consider resuming their search. The HPS found the aggregate price of a home in Canada increased 1.9% year-over-year to $824,300 in the second quarter of 2024 and a 1.5% increase from the first quarter despite a slowdown in activity in the country’s most expensive markets. By housing type, the national median price of a single-family home increased 2.2% year-over-year to $860,600, while the median price of a condominium increased 1.6% to $596,500 in the same time period. On a quarter-over-quarter basis, the median price of a single-family home increased 1.8% and the median price of a condominium increased 0.8%. The national aggregate home price remains well above pre-pandemic levels. In the second quarter of 2024, the aggregate price of a home in Canada recorded an increase of 30.8% over the same period in 2019. “2024 marks the fifth year since the pandemic and post-pandemic rebound began to wreak havoc on real estate prices,” said Soper. “Yes, values remain well above 2019 levels, yet a 30% rise in home values spread over five years, or six per cent annually, is approaching long-term norms for Canadian residential property appreciation. The market has a way of correcting mistakes.” For the last two years, the national housing market has seen home prices fluctuate between modest declines and increases, with some regional exceptions, as a result of the impacts of higher interest rates. As the Bank of Canada cautiously navigates the delicate balance between lowering the key lending rate and keeping inflation in check, some segments of Canada’s housing market have stalled, said Soper. “Canada’s housing market faces pent-up demand after two stifling years of high borrowing costs. While inflation control is crucial, persistently high rates are increasing the risk of a surge in demand when buyers inevitably return,” he said. “New household formation and immigration keep fuelling the need for housing and a sudden release could create much market instability. This highlights the need for a more nuanced approach that balances inflation control with economic vitality.” “It is worth noting that once you remove the impact of high mortgage rates themselves from Canada’s Consumer Price Index calculation, inflation today sits well below the two per cent target,” added Soper. According to Statistics Canada’s latest report, Canada’s inflation rate rose to 2.9% in May, up from 2.7% in April. When shelter costs are removed, that figure dips to 1.5%.
Canadians did not go on a home-buying spree after the Bank of Canada lowered its overnight rate on June 5 despite some initial expectations, according to the Royal LePage House Price Survey (HPS) released on Thursday. “Canada’s housing market is struggling to find a consistent rhythm, as the last three months clearly demonstrated,” said Phil Soper, president and CEO, Royal LePage. “Nationally, home prices rose while the number of properties bought and sold sagged; an unusual dynamic. The silver lining is inventory levels in many regions have climbed materially. This is the closest we’ve been to a balanced market in several years.” “This trend dominates activity in two of the country’s largest and most expensive markets, the greater regions of Toronto and Vancouver, where sales are down yet prices remain sticky. There are exceptions, in the prairie provinces and Quebec, low supply and tight competition persist.” Soper said following the rate cut, “some buyers raced to get a deal done ahead of an expected spike in demand. Yet, when that first cut finally occurred in early June, market response was tepid.” A change in monetary policy drives consumer behaviour in two important ways, said Soper. “Lower rates mean lower monthly payments, opening the door to some families previously shut out of the market. Secondly is the psychological signal broadcast to sidelined buyers that the tide is turning, and that market activity is about to pick up again,” he said. “Not surprisingly, the quarter-point cut to the bank rate didn’t substantially improve the affordability picture. As for consumer sentiment, our early year research indicated that only one in ten potential homebuyers would be motivated by a tiny rate drop. The tale the market tells as rate cuts get to the point of a material reduction in the cost of borrowing should be a very different one.” In a Leger survey conducted for Royal LePage earlier this year, 51% sidelined homebuyers said they would resume their search if interest rates reversed. Ten per cent said a 25-basis-point drop would prompt them to jump back into the market, 18% said they are waiting for a cut of 50 to 100 basis points, and 23% said they need to see a cut of more than 100 basis points before they will consider resuming their search. The HPS found the aggregate price of a home in Canada increased 1.9% year-over-year to $824,300 in the second quarter of 2024 and a 1.5% increase from the first quarter despite a slowdown in activity in the country’s most expensive markets. By housing type, the national median price of a single-family home increased 2.2% year-over-year to $860,600, while the median price of a condominium increased 1.6% to $596,500 in the same time period. On a quarter-over-quarter basis, the median price of a single-family home increased 1.8% and the median price of a condominium increased 0.8%. The national aggregate home price remains well above pre-pandemic levels. In the second quarter of 2024, the aggregate price of a home in Canada recorded an increase of 30.8% over the same period in 2019. “2024 marks the fifth year since the pandemic and post-pandemic rebound began to wreak havoc on real estate prices,” said Soper. “Yes, values remain well above 2019 levels, yet a 30% rise in home values spread over five years, or six per cent annually, is approaching long-term norms for Canadian residential property appreciation. The market has a way of correcting mistakes.” For the last two years, the national housing market has seen home prices fluctuate between modest declines and increases, with some regional exceptions, as a result of the impacts of higher interest rates. As the Bank of Canada cautiously navigates the delicate balance between lowering the key lending rate and keeping inflation in check, some segments of Canada’s housing market have stalled, said Soper. “Canada’s housing market faces pent-up demand after two stifling years of high borrowing costs. While inflation control is crucial, persistently high rates are increasing the risk of a surge in demand when buyers inevitably return,” he said. “New household formation and immigration keep fuelling the need for housing and a sudden release could create much market instability. This highlights the need for a more nuanced approach that balances inflation control with economic vitality.” “It is worth noting that once you remove the impact of high mortgage rates themselves from Canada’s Consumer Price Index calculation, inflation today sits well below the two per cent target,” added Soper. According to Statistics Canada’s latest report, Canada’s inflation rate rose to 2.9% in May, up from 2.7% in April. When shelter costs are removed, that figure dips to 1.5%.
