Yahoo Finance Slow sales in Canada's housing market boon for affordability, rate cuts: BMO
Although the number of houses for sale in Canada jumped by near-record amounts in April, a “calmer housing market” has kept prices down and helps improve the chances of a Bank of Canada rate cut, says BMO’s chief economist.
“When it comes to Canadian housing, calm is good,” Douglas Porter wrote in an analysis of the latest data from the Canadian Real Estate Association (CREA).
New listings rose 2.8 per cent from March to April, but seasonally adjusted sales dropped 1.7 per cent over that period, according to the CREA data. That bump in supply and drop in demand are what pushed up the total number of home listings by 6.5 per cent.
Porter notes that “soft activity in the priciest cities” — sales were down 3.4 per cent month-over-month in Montreal and Toronto and down roughly six per cent in Calgary, Ottawa and Halifax — helps explain why prices dropped 1.8 per cent compared with April 2023. The lack of buyer enthusiasm, Porter writes, has kept “a tight lid on prices, a welcome development given the extreme unaffordability in the housing market.”
In terms of interest rate cuts, Porter says the upshot of the market’s relative calmness is that governors will worry less that a future cut would “spark a major flare-up in prices.”
“At the margin, cooler home prices and more ample listings slightly increase the chances of rate relief in coming months.”
With that said, Porter notes that prospects for housing affordability in the future remain worrisome due to the sluggishness in new building. Housing starts this year will “struggle to hit” last year’s 240,000 mark, which itself is only half as many as the 2024 federal budget target, Porter writes.
That, coupled with the fact that most of the past year’s new housing starts are multi-unit buildings, which take longer to build, “suggests that new supply will not come riding to rescue for strained affordability soon."
John MacFarlane is a senior reporter at Yahoo Finance Canada. Follow him on Twitter @jmacf. Download the Yahoo Finance app, available for Apple and Android.
