The Canadian real estate market remains in a prolonged period of adjustment as buyers stay on the sidelines, waiting for more significant interest rate cuts to boost purchasing power and consumer confidence. Despite a modest 1.9% year-over-year increase in the national aggregate home price in Q2 2024, major markets like Toronto and Vancouver saw slower activity, with inventory building but demand lagging. Meanwhile, regions like Quebec City experienced a surge, with a 10.4% increase in aggregate home prices—the highest in the country.
Phil Soper, CEO of Royal LePage, highlighted the unusual market dynamics where prices are rising despite lower transaction volumes, particularly in Toronto and Vancouver. While a 25-basis-point cut by the Bank of Canada in June 2024 was expected to spur market activity, the response was tepid, with buyers awaiting more substantial reductions before re-entering the market.
According to the Royal LePage House Price Survey, the impact of higher borrowing costs on new home construction, leading to a slowdown in housing starts and exacerbating the supply shortage. This shortage continues to put upward pressure on prices, especially in markets with high demand and limited inventory.
Looking ahead, Royal LePage maintains its forecast of a 9.0% increase in national home prices by the end of 2024, with the Greater Toronto Area expected to see the highest appreciation at 10.0%. As interest rates gradually decrease, the market may see a resurgence in buyer activity, particularly if further rate cuts are implemented.