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Boost Expected in Canadian Housing Market Updates This Spring

Boost in Canada's Housing Market This Spring as Buyers Hope for Lower Interest Rates is Expected.

Boost in Canada's Housing Market This Spring as Buyers Hope for Lower Interest Rates is Expected. Royal LePage Estate Realty
Boost in Canada's Housing Market This Spring as Buyers Hope for Lower Interest Rates is Expected.

Nationally, home prices ended 2023 up 4.3% over prior year despite market slowdown.

In the face of challenges from high interest rates causing a slowdown, Canada's real estate is gearing up for a change this spring. Homebuyers and sellers are taking a cautious approach due to increased borrowing costs, and there's growing excitement for a comeback in real estate activity. The upcoming Bank of Canada rate cut adds to the anticipation, shaping the scene for a lively spring market. It's not just about economic shifts; the housing market's movements will mirror how the nation is adjusting to a new interest rate setup, reflecting changes in both transactions and people's feelings about the market.

High-interest rates have caused many homebuyers and sellers to push pause on their real estate plans over the last six months, significantly curtailing overall activity in housing markets across the country. However, as Canadians continue to adjust to higher borrowing costs and the first anticipated rate cut by the Bank of Canada nears, a brisk spring market is on the horizon.

“I believe the narrative suggesting that the housing market will rebound only when the Bank of Canada lowers rates misses the mark,” said Phil Soper, president and CEO of Royal LePage. “The recovery will begin when consumers have confidence the home they buy today will not be worth less tomorrow. We see that tipping point occurring in the first quarter, before the highly anticipated easing of the Bank of Canada’s key lending rate.”

According to the Royal LePage House Price Survey released today, the aggregate price of a home in Canada increased 4.3% year over year to $789,500 in the fourth quarter of 2023. However, the national aggregate home price decreased slightly by 1.7% on a quarter-over-quarter basis, highlighting that elevated borrowing costs continue to affect market activity as Canadians adapt to the higher interest rate environment.

Royal LePage recently issued its 2024 Market Survey Forecast, projecting that the aggregate price of a home in Canada will increase by 5.5% in the fourth quarter of 2024 compared to the same quarter in 2023.

In December, the Bank of Canada again held its key lending rate steady at 5.0%. It indicated that it has likely concluded its interest rate increase campaign and could begin making modest cuts later this year.

“The Bank of Canada governing council will soon face the difficult task of trying to balance the lowering of interest rates without simultaneously stimulating spending, which would cause inflation to rise again,” said Soper.

In November, the Consumer Price Index (CPI) rose 3.1% year-over-year, matching the increase in October.2 If mortgage interest costs are removed from the CPI calculation, inflation is 2.2%, close to the Bank of Canada’s target rate.3

“Similar to what we witnessed last spring, when the Bank of Canada paused rates for the first time in a year, causing sales activity and prices to increase almost immediately, the first sign of rate cuts – even if only by 25 basis points – could create a flurry of activity in the real estate market, releasing pent-up demand. Those who have been holding off listing their homes will follow close behind,” added Soper.

Read Royal LePage’s fourth quarter release for national and regional insights.

In conclusion, big changes are on the horizon for Canada's real estate. Even though there's been a slowdown, there's hope for a lively spring ahead. How things play out depends on economic stuff, how people feel about it, and what the Bank of Canada does. As everyone waits for signs of a rate cut, the market shows it can bounce back. Ultimately, trust in home values may lead the way to recovery. The Royal LePage 2024 Market Survey Forecast is hopeful, signalling a fresh start for Canada's real estate as the boost in Canada's housing market this spring as buyers hope for lower interest rates is expected.

Fourth quarter press release highlights:

  • Aggregate home price in greater regions of Toronto, Montreal and Vancouver posted gains of 5.1%, 4.1% and 2.7% year over year, respectively, in the final quarter of 2023

  • Among report’s major regions, Calgary recorded highest year over year price appreciation (10.7%); only major region to post quarterly price gains in Q4 2023 (1.5% over Q3)

  • 81% of regional markets posted a quarter-over-quarter decline

  • Approximately 2.2 million mortgages in Canada will be renewing over the next two years, most at a much higher interest rate.

If you're looking to navigate these changes or have questions about real estate, don't hesitate to reach out to us at Royal LePage Estate Realty, because, Helping You Is What We Do. Contact us today to explore your real estate journey with confidence.

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