Activity in Canada’s housing market remains “sluggish,” but a rebound may have already begun thanks to three consecutive interest rate cuts, a new report by Royal LePage suggests.
According to the Royal LePage House Price Survey released Thursday, the aggregate price of a home in Canada, compared with this time last year, increased 1.6 per cent to $815,500 in the third quarter of 2024.
The report said housing sales began picking up all across the country in September, with more than one-third (38 per cent) of housing markets covered in the report recording “positive aggregate price gains” in the third quarter of the year.
Royal LePage forecasts that further interest rate cuts could mean an early spring housing market boost in Canada.
“With rates dropping, we see positive signs for sidelined buyers. As confidence grows and buyers anticipate rising prices, we expect a significant increase in activity. Given the building demand – both organic and from immigration – the 2025 spring market may start as early as late January or early February, a pull-ahead phenomenon we’ve seen in previous market turnarounds. The stage is set for a busy year ahead,” the report said.
The report added that the federal government’s changes to lending rules, such as allowing all purchasers of new construction homes and all first-time buyers to acquire an insured mortgage with a 30-year amortization period and increasing the insured mortgage cap from $1 million to $1.5 million, will help more buyers get into the market.
Compared with this time last quarter, however, the national aggregate home price decreased 1.1 per cent, following sluggish activity in most – though not all – markets through the summer months.
“Despite three cuts to the Bank of Canada’s overnight lending rate, buyer demand nationally remains weak, particularly among two key groups: first-time homebuyers and small investors,” said Phil Soper, president and chief executive officer at Royal LePage.
“First-time buyers, who are more sensitive to interest rates, are adopting a wait-and-see attitude. With home prices essentially flat and interest rates steadily declining, they perceive no penalty in postponing their purchase.”
The highest increase in prices came for single-family detached homes, which rose two per cent to a median price of $850,400. Meanwhile, condos saw a smaller 0.5 per cent increase to $590,200.
Canadian economy to see ‘sluggish growth’
The Canadian economy is facing headwinds, which means the country’s GDP growth is expected to be a muted 1.4 per cent in the fourth quarter of 2024, a new report said Thursday.
A report by the Canadian Federation of Independent Businesses said on Thursday that economic forecasts based on the most recent (June 2024) data indicate that Canada’s GDP growth slowed to 1.2 per cent in the third quarter after posting a gain of 2.1 per cent in the second quarter, as anticipated.
While retail sales rebounded in the third quarter, compared with the second quarter, the report said they are expected to be “very weak” in the fourth quarter as more firms report experiencing insufficient demand. This leaves the level of sales unchanged from one year ago, the report, published in the CFIB’s economic publication Main Street Quarterly, said.
Good news for Canadians came in the form of falling inflation, with consumer price inflation reaching 2.1 per cent year over year in the third quarter. The CFIB predicts that inflation will remain on the Bank of Canada’s two per cent target.
Employment figures were stronger than anticipated in the second quarter, with payroll employment growing at 1.5 per cent.
While this is expected to moderate in the second half of the year, it will remain at “healthy levels” according to the CFIB – 1.2 per cent in the third quarter and 1.3 per cent in the fourth quarter.
© 2024 Global News, a division of Corus Entertainment Inc.
