Following growth in the previous two months in the wake of a slight upturn in the real estate market activity at the start of winter, house prices in Canada’s major urban centres remained unchanged on a seasonally adjusted basis from March to April. This stabilization comes as resale market activity remains sluggish in the spring, with first-time homebuyers possibly on the sidelines awaiting possible interest rate cuts from the Bank of Canada by summer. Weakness is particularly noticeable in the country’s largest city, Toronto, where the job market has deteriorated significantly in recent months (unemployment rate now 7.9% vs. 5.6% a year earlier). Although record demographic growth, a shortage of housing supply, more favourable fixed mortgage rates than last year and possible cuts in the policy rate will continue to support the Canadian real estate market in the months ahead, we are cautiously optimistic about the extent of an eventual recovery in the housing market in the months ahead and its potential impact on prices. Indeed, many uncertainties remain, including the risk of a further deterioration in the labour market, particularly among young people who are facing the worst affordability conditions in decades.

May 2024