Residential sales in the country during the month of August were down 2.1% year-over-year, according to the Canadian Real Estate Association (CREA). Despite a “stagnant” market nationally, the situation is quite different in Quebec, where sales increased by 10% compared to the same month last year.
While down on a year-over-year basis, national home sales were up 1.3 per cent in August compared with July, according to CREA, which represents more than 160,000 brokers across the country. The actual average home price was little changed (+0.1 per cent) year-over-year at $649,100.
The association’s data came after the Bank of Canada cut its policy rate by 0.25 percentage points in June and July. The central bank made a similar cut earlier this month, bringing the rate down to 4.25% — the impact of that latest cut will be seen in September sales.
“The Canadian housing market continues to appear to be stagnant,” Shaun Cathcart, senior economist at CREA, said in a statement. He said that with the prospect of further interest rate cuts through 2025 — widely anticipated by economists — “it makes sense for potential buyers to continue to wait for improved affordability” before purchasing a home.
The National Bank has a similar reading of the situation. In an analysis published Monday, the institution estimates that “despite the continuation of the monetary policy easing cycle, the housing market remains sluggish, and shows no signs of significant recovery.” This is because interest rates remain “deeply in restrictive territory,” which is harming affordability. The state of the Canadian economy, which is showing several signs of running out of steam, is also contributing to buyers’ reluctance.
The bank notes in passing that new listings increased by 1.1% between July and August, a seventh increase in eight months. “The question arises as to whether this increase is the result of the financial pressures faced by some owners who wish to sell their property to reduce their debt,” a situation which remains marginal, according to Daren King, economist at the National Bank and author of the study.
A more vigorous market in Quebec
The real estate market has shown more strength in Quebec than elsewhere in the country. Home sales in August were up 10% compared to last year, according to the National Bank, a performance light years away from the 2.1% decline across the country. Month-over-month, sales rose 3.4% in the province, above the Canadian average of 1.3%.
“Every time [que la Banque du Canada] lowers rates by a quarter of a point, it’s like reintroducing a portion of the buyer population” into the market, explains Georges Bardagi, a real estate broker affiliated with the RE/MAX real estate agency. “There was no sudden change” after the first interest rate cut, but subsequent cuts have warmed up the market, he says. “We feel that there is a change in cruising speed.”
Many buyers are thinking about acquiring a home before further rate cuts to avoid the bidding wars that could become more common as more buyers enter the market, Bardagi said. “I expect prices to continue to rise […] “since we don’t have enough properties to sell” to meet demand, he maintains.
Michèle Fournier, a broker affiliated with Royal LePage Inter-Québec, notes a strong real estate market in the capital region. She has observed a return of multiple offers for properties under $400,000 in the Quebec City region. “I think the drop in interest rates [va faire en sorte que] people may be able to afford more expensive housing.”