Despite recent reductions in mortgage rates, the Canadian real estate market remains largely sluggish. A new report from RBC Economics shows that two consecutive interest rate cuts by the Bank of Canada—one in June and another in July—have not revived activity in most major resale markets. While mortgage rates have fallen, homebuyers continue to face challenges in affordability, and the expected resurgence in the market has yet to materialize.
Key Findings From the RBC Report
Sales Activity Across Major Cities
- Calgary saw the steepest drop in sales, down nearly 20% year-over-year in August. At the same time, new listings in the city rose by 13%, reflecting a substantial increase in inventory.
- Vancouver also experienced a sharp decline in sales, falling 17% year-over-year, while new listings grew 4%.
- In the Fraser Valley, sales dropped 16%, but new listings rose by 6%, further contributing to the growing supply in the market.
- Toronto witnessed a more modest decline in sales, down 5%, with a 1.5% increase in new listings. However, the city also recorded the highest year-over-year inventory increase of over 46%.
Edmonton and Montreal Outperform
- Two cities bucked the national trend: Edmonton and Montreal. Sales in Edmonton grew by nearly 16%, and new listings increased by 7.5%. Meanwhile, Montreal saw a 9% increase in sales and a 2% rise in new listings.
- These markets currently favor sellers, with stronger demand and more limited supply compared to other regions.
Why Rate Cuts Haven’t Revitalized the Market
Although interest rate cuts typically stimulate housing demand, the market's muted response suggests that deeper reductions may be necessary to spur more significant activity. The high cost of homeownership, especially in cities like Toronto and Vancouver, continues to deter buyers, even as borrowing costs drop. RBC Economics highlights that the price points in these major markets remain out of reach for many potential buyers, who continue to wait for more favorable conditions.
Moreover, the steady rise in new listings, particularly in Toronto, reflects an increasing number of newly completed units—many of which are condominiums—that investors are looking to offload. This, coupled with slow buyer activity, is contributing to a shift in market dynamics that now slightly favors buyers in some areas, especially in the condo market.
Supply and Demand Dynamics
The influx of new listings in several major cities is easing the previously tight balance between supply and demand. Toronto is now considered a market favoring buyers, particularly in the condo segment. Rising inventory is giving buyers more options and potentially shifting pricing power in their favor.
In Calgary, the surge in new listings is also helping to rebalance the market. While the city's market has been tight for several years, the recent increase in supply could help temper price growth.
What to Expect Moving Forward
Looking ahead, experts predict that further rate cuts from the Bank of Canada will be needed to generate more significant demand in the housing market. RBC Economics forecasts continued rate reductions into 2025, which may eventually help bring more buyers back into the market. However, for now, high ownership costs and limited affordability remain key barriers.
The ongoing increase in inventory is expected to continue in the near term, offering buyers more flexibility and potentially driving further price moderation, particularly in the higher-priced segments like Toronto's condo market.
Conclusion
While recent rate cuts have provided some relief, Canada’s real estate market remains in a slump. Sales activity has declined in most major cities, and despite a rise in new listings, potential buyers are holding out for deeper rate cuts and improved affordability. Cities like Edmonton and Montreal stand out as exceptions, with growing sales and seller-favorable conditions. As the market waits for further interest rate reductions, the balance of supply and demand may continue to shift, giving buyers more options in the months to come.
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The content of this article is for informational purposes only and should not be considered as financial, legal, or professional advice. Coldwell Banker Horizon Realty makes no representations as to the accuracy, completeness, or suitability of the information provided. Readers are encouraged to consult with qualified professionals regarding their specific real estate, financial, and legal circumstances. The views expressed in this article may not necessarily reflect the views of Coldwell Banker Horizon Realty or its agents. Real estate market conditions and government policies may change, and readers should verify the latest updates with appropriate professionals.
