The recent interest rate cuts by the central bank have not had a significant impact on the Canadian housing market, according to data from July. While experts anticipate that lower borrowing costs will attract more buyers in the fall, creating pockets of affordability in certain markets across Canada, the overall housing activity in July saw a decline in home sales after a brief uptick following the initial rate cut.
Despite two consecutive quarter-percentage-point rate cuts in back-to-back months by the Bank of Canada, the effects were only felt in the final week of July’s sales. This decrease in the benchmark interest rate has helped lower the barrier to entry into the housing market, making it more accessible for prospective buyers.
Market analysts are now predicting that the central bank may continue to cut interest rates at each meeting for the remainder of the year. This trend is expected to bring down variable-rate mortgages as well as impact fixed mortgages as bond yields decrease in the coming weeks.
While there was a slowdown in sales in July, economists believe that buyer demand will respond positively to lower interest rates, leading to a stronger showing in the second half of the year. This optimistic outlook is supported by a resilient economy, robust population growth, and falling rates.
Despite the current spotty conditions in the housing market, experts suggest that affordability may improve in the fall, particularly in markets like Calgary, Edmonton, and Saskatoon where supply remains tight. However, in Ontario and British Columbia, where there is more inventory, buyers have more negotiating power and a wider range of choices.
Looking ahead, analysts forecast that home prices will remain relatively flat in the near term, with a potential acceleration in late 2024 or 2025 as more buyers enter the market due to lower borrowing costs. There is likely to be increased affordability with further easing of fixed-rate mortgages, but the overall financial impact on the average homebuyer remains uncertain.
In Toronto, the condo market may experience further price declines due to an influx of pre-built units entering the market. This could present an opportunity for first-time buyers to purchase property in Toronto, as affordability improves in entry-level properties compared to townhomes and detached homes.
