Yahoo Finance Canada real estate: Home prices continue to rise despite slumping sales, says Royal LePage
"This is the closest we've been to a balanced market in several years"
Home prices in Canada climbed 1.9 per cent in the second quarter of the year, Royal LePage said in a report released Thursday, even as inventory levels climbed, activity slowed and prospective buyers remained on the sidelines.
Royal LePage said the national aggregate price of a home increased 1.9 per cent on an annual basis to $824,300 in the second quarter of 2024. On a quarterly basis, prices were up 1.5 per cent. Royal LePage calculates aggregate prices using a weighted average of the median value of all housing types.
The increase came despite a slowdown in Canadian housing activity across the country. National home sales were down 5.9 per cent on an annual basis in May, according to the Canadian Real Estate Association (CREA). In Canada’s most expensive housing markets, the slowdown has been even more pronounced. Greater Toronto home sales declined 16.4 per cent in June, while Vancouver home sales fell 19.1 per cent.
Royal LePage president and CEO Phil Soper called the increase in prices amid sagging sales “an unusual dynamic.”
“Canada’s housing market is struggling to find a consistent rhythm, as the last three months clearly demonstrated,” Soper said in a statement.
“The silver lining: inventory levels in many regions have climbed materially. This is the closest we’ve been to a balanced market in several years.”
The slump in sales comes as the Bank of Canada embarks on a loosening cycle following an aggressive tightening campaign. The central bank cut its key rate by 25 basis points to 4.75 per cent in June, the first reduction in more than four years and the first cut from a G7 central bank. Still, the decrease in the benchmark rate was not enough to get buyers off the sidelines in a meaningful way.
A Royal LePage survey conducted by Leger earlier this year found that 51 per cent of sidelined homebuyers said they would resume their search if interest rates reversed. Just 10 per cent said a 25 basis point hike would be enough to get them back into the market, while 18 per cent said they would need rates to be between 50 and 100 basis points lower, and 23 per cent said they would need to see more than 100 basis points of cuts get off the sidelines.
“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, market response was tepid,” Soper said, noting that the cut didn’t substantially improve affordability.
“The tale the market tells as rate cuts get to the point of a material reduction in the cost of borrowing should be a very different one.”
Despite the so-far tepid response to the Bank of Canada’s rate cut, Royal LePage maintained its year-end forecast and expects home prices to increase 9 per cent annually by the fourth quarter of 2024.
Royal LePage expects the Greater Toronto Area will see the greatest price appreciation of all major markets in the fourth quarter of 2024, with prices set to increase 10 per cent. The Greater Vancouver area will see prices increase 5.5 per cent in the fourth quarter, while Montreal will see prices increase 8.5 per cent.
Calgary, which has seen sales activity remain strong through 2024, is expected to see prices increases 8 per cent in the fourth quarter. Edmonton will see a 6.5 per cent increase, Royal LePage said.
Alicja Siekierska is a senior reporter at Yahoo Finance Canada. Follow her on Twitter @alicjawithaj.
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