The Canadian housing market is expected to see some relief for first-time homebuyers this fall as interest rates decline, making it easier for buyers to enter the market. Despite the Bank of Canada’s rate cuts over the spring and summer, activity in the market has been relatively slow. Lower interest rates have the potential to attract more buyers who were previously unable to afford a mortgage, but experts believe that prices will remain relatively flat even as interest rates decrease. The hope is that the fourth quarter of 2024 will see an increase in sales due to the lower borrowing costs, but overall, the market is still expected to be slower compared to pre-pandemic levels.
As interest rates continue to drop, there may be a sense among buyers to wait for even lower rates before entering the market. This could lead to a more competitive environment for properties as more buyers hold out for better financing options. Bank of Canada Governor Tiff Macklem has noted that as interest rates fall and housing market activity increases, home prices may also rise. However, Re/Max Canada’s fall housing market outlook predicts modest price increases in most Canadian cities, with some markets in Ontario expected to see price drops towards the end of the year.
Some experts believe that the recent rate cuts are encouraging more buyers to re-enter the market, especially in areas where supply outweighs demand, allowing buyers more negotiating power. Condos, in particular, may see a price correction as there is currently an oversupply in the Toronto market. Average prices for condos have already dropped, and further reductions are expected as new completions hit the market and declining rents lead to more properties being listed. The overall housing market affordability is expected to improve into the fall, although it may still remain strained in most markets due to elevated interest rates and high home prices.
While the market may see a temporary uptick in prices due to lower interest rates and increased demand, there are concerns about the long-term sustainability of these changes. Investors may withdraw their properties from the market if prices continue to decline, and buyers may rush in to take advantage of lower rates, creating a volatile environment. However, there is also optimism for first-time buyers, particularly in the condo market in Vancouver and Toronto, where prices and borrowing costs are expected to align favorably. Ultimately, experts believe that conditions will normalize across various Canadian cities this fall, providing opportunities for buyers to enter the market at a reasonable price in different regions outside of the more expensive urban centers.
