After remaining relatively stable over the previous two months, house prices in Canada’s major urban centres rose more significantly in August, increasing by 0.6%, supported by lower interest rates. However, we do not believe that this marks the start of a significant upward trend in Canadian home prices since, despite the continuing cycle of monetary policy easing, the resale market remains sluggish, showing no signs of significant recovery. Indeed, although interest rates have fallen, they remain deeply in restrictive territory. As a result, affordability conditions remain extremely difficult, while the labour market continues to deteriorate across the country, and even more acutely among young people. What’s more, with the Bank of Canada indicating that it intends to make further rate cuts in the months ahead, and with the announcement of an increase in amortization from 25 to 30 years to come in December, it’s likely that some buyers will decide to be patient in the months ahead and sit on the sidelines waiting for even more favourable financing conditions. After a few months in the doldrums, the housing market could start to pick up again in 2025.

September 2024