A new report from realty firm Royal LePage is predicting a 10 per cent increase in the cost of buying a Canadian home by the end of 2024.
The report identifies two key drivers that are inflating the prices: the significant shortage of housing across the country alongside increased demand from sidelined homebuyers who could potentially enter the market if the Bank of Canada were to lower its key interest rate, currently sitting at five per cent.
“A decrease in the bank rate, which will translate into cheaper mortgages, will increase the demand in the marketplace” and push up prices, Royal LePage CEO Philip Soper said in an interview.
Citing previous Royal LePage reports, Soper indicated that Canadians who have been waiting to buy a home will take an even a nominal cut in interests rates as an indicator that it’s time to buy.
“When we reach out to Canadians,” he said, speaking from Toronto, “they say, ‘I just want to see some indication that rates are beginning to drop (so) that I’ll feel comfortable getting into the market.’”
On Friday, the Canadian Real Estate Association (CREA) stated that interest rates are predicted to continue to be a “major factor” that is impacting the housing market both this year and into next.
“Many Canadian housing markets have been quiet since the Bank of Canada’s summer rate hikes last year,” CREA said in its latest housing forecast.
“Interest rates have been the major factor affecting markets over the last few years, and this is expected to continue to be the case in 2024 and 2025.”
Additionally, CREA released its March housing data on Friday, identifying that some home sales increased by 0.5 per cent from the previous month.
The MLS home price index remained mostly unchanged month-over-month in March, dropping 0.3 per cent, the association said. However, CREA noted through weekly tracking showed an influx in new supply around the second week of March, leading to a “burst of sales” at the end of the month, and a a further increase in listings in the first week of April.
“We’ll have to wait for the April data to really understand how buyers are responding to all these new properties for sale, but if you look at last spring as a guide and add to that record population growth in the last year and a central bank that is far more likely to cut this summer than raise like it did last year, it could get interesting,” said CREA senior economist Shaun Cathcart in a release.
John Pasalis, president of Toronto brokerage Realosophy Realty, did issue a caution, however, that while some may be holding out for lower interest rates, it may not help homebuyers.
“If rates drop enough, it’s going to stimulate more demand, it’s going to push prices higher,” he said. “People expect that (lower rates) could potentially give them a bit more of an edge, but it gives every other buyer an edge as well.”
Soper said Royal LePage adjusted its price prediction upwards after a strong first quarter in 2024.
Nationwide, the report shows the median price for a single-family, detached home rose by 4.5 per cent, from the first quarter of 2023 to the first quarter of 2024, to $845,300. Similarly, the median price of a condo increased by 3.5 per cent to $591,900.
The continued rise in home prices has evolved into a political topic of hot discussion which has prompted the federal and many provincial governments to unveil plans to lower prices, including the rapid construction of homes to increase supply.
Soper hailed the policies to increase housing supply as “strong” however opined that the execution was slow.
He referenced plans to provide tax breaks and incentives to homebuyers calling them “well-intentioned mistakes,” as they will invite more would-be buyers, thereby increasing demand and drive up prices further.
On Thursday, Deputy Prime Minister and Finance Minister Chrystia Freeland announced new measures intended to make it easier for first-time buyers, including an increase to the withdrawal limits under the Home Buyers’ Plan as well as extending mortgage amortizations for some.
Pasalis advised potential homebuyers to avoid taking their cues from recent announcements.
“It’s so impossible to time the market,” Pasalis said.
“When you’re buying a home, you just want to buy for the long term, and not try to focus on predicting where home prices will be over the next three to six months because it’s very hard to predict.”
— with files from globalnews.ca
It’s a crying shame what this country has become when our young can’t afford a home . We had a home in the old days on one income . Yes homes cost less but wages were also less but most families survived and had money put away as well … thank you prime minister you disgraceful extort a leader
^^^^^^^^^^^Why is there a fake Nellie allowed to post here? ^^^^^^^^^^
The cost of building a home goes up EVERY DAY.
The REAL Nellie.