Home sales increased in major Canadian cities: Toronto, Vancouver, Calgary saw increases of more than 30%

Written by Sammy Huds in Toronto

Rising home sales in Canada's biggest markets starting in 2024 are unlikely to prompt the Bank of Canada to delay a potential interest rate cut later this year.

The start of the year has shown signs of a rebound in some major housing markets, including the Greater Toronto Area, where home sales jumped 37 percent in January from a year ago.

Sales of 4,223 homes last month were up 22.9 percent from December, according to data released Tuesday by the Toronto Regional Board of Realtors. It pointed to lower borrowing costs associated with fixed-rate mortgages, bringing some buyers back into the market.

Other local real estate boards also reported year-over-year increases in home sales activity last month, with sales up 38.5 percent in Vancouver, 37.7 percent in Calgary and 18 percent in Montreal.

“It's clear that market sentiment is starting to improve,” said Benjamin Tal, deputy chief economist at CIBC Capital Markets.

“The market is starting to internalize that interest rates have peaked.”

According to Tal, the key question is whether retailers will respond to the renewed demand. If the housing market sees an improvement in the number of new listings, that will prevent prices from rising too quickly over the next six months.

But Jason Mercer, TRREB's chief market analyst, predicted that when the Bank of Canada starts to cut its key rate from the current five per cent level, possibly in the second half of 2024, competition among buyers will drive up prices amid tight supply.

Jessica Hammel, a broker who focuses on downtown and downtown Toronto real estate for Real Broker Ontario, said many prospective buyers aren't waiting for good loan terms to make their move.

“Even the promise of lower rates in the near future has helped people feel comfortable taking action,” he said.

“I think buyers are more savvy now. They know that when things start to go down with rates, prices will go up again. They see this opportunity and are taking advantage of it.”

Greater Toronto saw no new listings last month, up 6.1 percent year-over-year, keeping pace with homebuyer activity that is contributing to a tighter market, TRREB said. The median home price fell one percent year-over-year to $1,026,703, down 5.4 percent from the last month of 2023.

New listings also lagged sales in Vancouver, where they were 9.1 percent below the 10-year seasonal average last month, and Calgary, where inventory is near record lows.

The Bank of Canada has been cautious about the potential impact on the housing market if it moves too quickly to cut its policy rate.

In a summary of the board's deliberations that led to the December decision to keep rates on hold, members said premature fiscal easing could reinvigorate Canada's housing market and add to inflationary pressures.

“The Bank of Canada is obviously looking at the supply and demand situation, but we're not in an area right now where the market might start to overheat a little bit, so there could be price increases that could be problematic for the bank. “said Robert Haug, assistant chief economist of RBC.

“I think what we're seeing now is not necessarily a red flag for the bank to start changing its signals to the market.”

Hogue said the level of activity is likely to remain the status quo until a mid-year projected rate cut, which he said would need to happen “for this kind of nascent recovery to be sustainable.”

“The broader recovery, we think, will be more in the second half of this year,” he said.

In the Toronto area, sales across all home categories rose year-over-year last month, with townhouses up 54.5% and semi-detached homes up 42.9%. The number of condominiums changing hands was 41 percent higher than a year ago, as single-family home sales rose 27 percent.

With demand high, Hammel said, “this is not the time to sit back and wait and see what happens” for those considering buying a home.

“People need to at least start making plans, such as assessing their personal circumstances, getting pre-approval to see where they stand, and taking calculated actions,” he said.

This report by The Canadian Press was first published on February 6, 2024.