According to a new report from Royal LePage, the Bank of Canada’s recent quarter-point interest rate cut has not significantly increased homebuyer demand. The report outlines market trends across Canada for the second quarter of 2024. It reveals that activity in major markets like Toronto and Vancouver remained below average this spring despite expectations that lower interest rates would drive potential homebuyers to re-enter the market. Phil Soper, President and CEO of Royal LePage, commented on the situation, stating, “This spring, with bank rate cuts highly anticipated, we saw some buyers race to get a deal done ahead of an expected spike in demand.
Yet, when that first cut finally occurred in early June, the market response was tepid.”
A survey conducted by Royal LePage earlier this year suggested that 51% of potential homebuyers would renew their search if interest rates decreased. However, only 10% said that a 25-basis-point cut would prompt them to return to the market, with 18% waiting for a cut of 50 to 100 basis points and 23% needing a reduction of more than 100 basis points.
Bank rate cut impact muted
“Not surprisingly, the quarter-point cut to the bank rate didn’t substantially improve the affordability picture,” Soper added. “The market dynamics could change significantly if more material reductions in borrowing costs occur.”
The report also indicated that the national aggregate home price rose by 1.9% year-over-year, reaching $824,300 in the second quarter of 2024—a 1.5% increase from the first quarter. The national median price of a single-family detached home increased by 2.2% year-over-year to $860,600, while the median price of a condominium saw a 1.6% rise to $596,500.
Looking ahead, Royal LePage forecasts that the aggregate price of a home in Canada will climb by 9% to $860,555 in the fourth quarter of 2024 compared to last year. Despite the muted response to the interest rate cut, Soper expects modest improvements in home prices through the final quarter of the year, with growth likely in the low-to-mid single digits. Although Royal LePage doesn’t anticipate another rate cut at the Bank of Canada’s meeting on July 24, demand is building due to Canada’s growing population and increased savings rates, especially among millennials eager to enter the housing market.
