One economist expects a gradual recovery in homebuyer demand, saying lower borrowing costs will be needed to bring prices down in Canada’s largest markets.
In a report Thursday, RBC Economist Rachel Battaglia said that the Bank of Canada’s rate cut in July has done “little to entice buyers into the housing market.” She noted that resales pulled back, falling 0.7 per cent between June and July, compared to a 3.5 per cent gain in June. Battaglia said that home resales have remanded “largely static” with softness concentrated in Ontario and B.C.
“More interest rate cuts are likely to stimulate homebuyer demand across the country. But, we expect this will be gradual. Significant reductions in rates will be needed to make a noticeable difference in ownership costs—especially in Canada’s priciest markets,” she said in the report.
Going forward, Battaglia said she expects a slower recovery in the market with a “potential acceleration” occurring near the end of this year and into 2025 as interest rates fall further.
“We see prices heating up slowly as well, though some markets, like Toronto, could face another wave of price drops if inventories continue to rise significantly,” the report said.
The report also highlighted that apart from “solid June activity,” the market has seen little movement with activity levels comparable to those recorded in March.
“Buyers didn’t come to market with the same enthusiasm seen in the past this July. They retreated back to the sidelines after a solid sales pickup in June,” the report said.
This trend has been particularly strong in Toronto and Vancouver, where Battaglia said some buyers are “waiting for clearer signs of market direction.”
“Still, clearer signs of market recovery are forming in other Ontario and B.C. cities. Hamilton-Burlington, Ottawa, Guelph, and Kitchener-Waterloo have all recorded a second consecutive increase in monthly sales on a seasonally adjusted basis this July,” Battaglia said in the report.
“It’s possibly a sign of renewed buyer appetite.”
