News and Economic Reports

After almost a year in the doldrums, house prices in Canada’s major urban centers rose by 0.5% for the second consecutive month, supported by more advantageous interest rates. Despite a significant rise in the number of new listings on the resale market, inventory has been stalling over the past four months due to a large number of sellers deciding to cancel their listings each month, thus limiting the deterioration in market conditions for the time being. However, we do not believe that this is the start of a significant upward trend in home prices across the country 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, affordability conditions remain extremely difficult and the job market less buoyant, particularly for young people. With the Bank of Canada set to make further rate cuts in the coming months, and with the announcement of an increase in amortization from 25 to 30 years for insured mortgages to come in December, it’s likely that many buyers and sellers have decided to be patient and will sit on the sidelines in the months ahead, waiting for even more favourable financing conditions. After a few months in the doldrums, housing market activity could pick up again in 2025.

October 2024

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

After remaining stable in June, the lethargy continues for house prices in Canada’s major urban centers in July, with only marginal growth of 0.2% during the month. This relative stability comes as the resale market fell back slightly during the month after a brief rebound in activity in June, which followed the start of the Bank of Canada’s monetary easing cycle. All in all, resale market conditions point to a fairly balanced market between buyers and sellers at national level, reducing pressure on prices. While record population growth, a shortage of housing supply and the Bank of Canada’s forthcoming rate cuts will continue to support the Canadian real estate market in the months ahead, we are cautiously optimistic about the magnitude of any 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. It’s true that consumer confidence has been somewhat reinvigorated by the start of overnight rate cuts, but interest rates remain in highly restrictive territory for the time being.

August 2024

After experiencing modest increases since the start of 2024, house prices in Canada’s major urban centers remained stable in June, while market conditions for the housing market continue to indicate balanced conditions between buyers and sellers. It’s true that the beginning of the monetary easing cycle in June encouraged more buyers to take action during the month, but we didn’t see a major wave of new transactions that could have put upward pressure on prices. While record population growth, a shortage of housing supply and upcoming rate cuts by the Bank of Canada will continue to support the Canadian real estate market in the months ahead, we are cautiously optimistic about the magnitude of any recovery in the housing market in the coming months, 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. It’s true that consumer confidence has been somewhat reinvigorated by the start of overnight rate cuts, but interest rates remain in highly restrictive territory for the time being.

July 2024

After remaining relatively stable since the start of 2024, house prices in Canada’s major urban centers rose by 0.5% from April to May, against a backdrop of renewed optimism following the start of the monetary easing cycle by the Bank of Canada. The increase observed in May was entirely due to a rise in prices in the non-condo segment (+0.7%), while condo prices have remained relatively stable since August 2023 as inventory in this segment continues to accumulate. While record population growth, the shortage of housing supply and the start of rate cuts by the Bank of Canada will continue to support the Canadian real estate market in the months ahead, we are cautiously optimistic about the magnitude of any 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.

June 2024

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

After returning to growth territory in February, the Teranet-National Bank Composite Index™ continued to rise in March, with a small gain of 0.2% on the previous month. This increase in home prices comes at a time when the housing market has regained strength since November, buoyed in particular by exceptional demographic growth, slightly more advantageous fixed mortgage interest rates and the anticipation of policy rate cuts by the Bank of Canada. Although these factors will continue to support the real estate market in the months ahead, we are cautiously optimistic about a significant recovery in the housing market in the coming months and stronger price growth. Indeed, many uncertainties remain, including a potential further deterioration in the labour market for young people, who are facing the worst affordability conditions in decades.

April 2024

After contracting by 1.5% over the previous five months, the Teranet-National Bank Composite Index^TM finally returned to growth in February, rising by 0.2% compared with the previous month. This increase in property prices comes at a time when the housing market regained strength between November and January, buoyed by exceptional demographic growth, more advantageous fixed mortgage interest rates and the anticipation of interest rate cuts by the Bank of Canada. However, it remains to be seen whether this is the start of an upward trend. On the one hand, the lack of housing supply on the market will continue to support prices, but the persistent affordability challenges should limit households’ ability to pay and thus the increase in property values. It appears that the resale market started to slip again in February, while bond yields have risen in recent weeks due to less favourable news on inflation, which is delaying potential cuts in the overnight rate. As a result, we expect home prices to move sideways in the short term.

March 2024

The Teranet-National Bank Composite Index^™ continued its correction for a fourth consecutive month in January, with prices down 0.3% on a seasonally adjusted basis compared with December. It should be noted, however, that the drop in the composite index in January was due solely to lower prices in two major cities where affordability remains a major issue, namely Vancouver and Toronto. As a result, house prices across the country are now 3.7% below their April 2022 peak. However, renewed activity in the resale market raises the question of whether this weakness will persist. This rebound in transactions is taking place against a backdrop of strong demand due to exceptional demographic growth and the reduction in mortgage interest rates since October. Moreover, in a context where the lack of housing supply remains problematic, the end of Bank of Canada rate hikes and potential rate cuts have reduced uncertainty and offered a window of opportunity to some buyers. It remains to be seen whether this upturn will be long-lasting, given that we expect the labour market to experience further difficulties later this year.

February 2024

The Teranet-National Bank Composite Index™ continued its correction for a third consecutive month in December, with prices down 0.5% compared to November in a context where the number of transactions on the resale market continues to be weak, despite a rebound during the month. Indeed, persistent affordability issues (despite the recent drop in fixed mortgage rates), combined with a less buoyant job market, have contributed to the decline in property prices. Despite a less vigorous economy, we are not yet witnessing a wave of additional supply on the real estate market. In fact, active listings declined in December, and the number of months of inventory fell from 4.2 in November to 3.8 during the month, helping to limit the fall in prices. For the months ahead, prices should continue to decline despite the support of historical population growth and the shortage of housing supply, as the deterioration in the labour market is set to continue. We expect the composite index to return close to its early 2023 low by late spring, with a cumulative decline of around 8% from its April 2022 peak. For their part, the interest rate cuts expected to begin in Q2 should set the stage for market stabilization in the second half of the year.

January 2024