Canada’s housing markets are navigating a complex landscape as recent interest rate cuts by the Bank of Canada in June and July provided a mixed impact across the country, according to a new report from Royal Bank of Canada (RBC).
The bank’s assistant chief economist Robert Hogue said outcomes have been uneven despite rate reductions intended to alleviate the pressure on the housing market, with some cities showing signs of recovery while others continue to struggle.
In Vancouver, Calgary, and Toronto, the initial optimism following the rate cuts has waned, as home resales declined in July, erasing some of the gains seen in June. In contrast, Edmonton and Montreal experienced modest increases in activity, signalling a slow but steady recovery.
Supply outpaces demand
One of the critical issues facing the Canadian housing market is the growing imbalance between supply and demand. In cities like Toronto, the completion of numerous new condos has flooded the market with properties, many of which are now being listed by investors seeking to sell. This surge in supply has not been met with a corresponding increase in demand, leading to a buildup of inventories, particularly in the condo segment.
In Toronto, condo listings surged by 64% compared to last year, contributing to a 5% year-over-year decline in home prices. Detached homes also saw a price decline of 4.3%.
Vancouver faces a similar situation, with rising inventories and flat prices. The number of homes for sale is approaching pre-pandemic levels, and with high interest rates putting pressure on homeowners, more properties may soon be forced onto the market. This could lead to a mild price correction if demand doesn’t pick up.
On the other hand, cities like Calgary and Edmonton, which have been experiencing robust demand, particularly due to population growth, are seeing more favourable conditions for sellers. However, even in these markets, the rate of price appreciation has slowed. Calgary, the hottest housing market in Canada, saw a 7.7% annual increase in its composite MLS Home Price Index (HPI) in July, down from 10.8% in March, indicating a cooling trend.
Homebuyer sentiment and the need for deeper cuts
The central issue remains affordability. Many potential homebuyers are waiting for deeper rate cuts before entering the market, the report noted. The modest reductions in June and July have not been enough to significantly lower ownership costs, especially in high-priced markets like Toronto and Vancouver. In these cities, strained affordability continues to keep buyers on the sidelines, with many hoping for more substantial rate cuts to ease the financial burden.
Montreal offers a glimmer of hope, with its housing market showing signs of recovery. Home resales there rose for the second consecutive month in July, with median prices for single-family homes and condos up by 6% and 4%, respectively, from the previous year. However, inventories are gradually rebuilding, which could limit future price gains if demand doesn’t strengthen further.
CMP
No comments:
Post a Comment