Despite expectations that lower interest rates would spur homebuyers into action, a recent report reveals that the Bank of Canada’s quarter-point cut to its key interest rate last month did not result in a significant surge in demand.
The latest Royal LePage house price survey, released on Thursday, highlights market trends across Canada during the second quarter. The survey notes that while demand continues to outpace supply in the Prairies and Quebec, Toronto and Vancouver experienced slower-than-expected activity this spring.
Phil Soper, president and CEO of Royal LePage, observed that prices have remained relatively stable in Canada’s largest markets. He noted, “This spring, with bank rate cuts highly anticipated, we saw some buyers race to get a deal done ahead of an expected spike in demand. Yet, when that first cut finally occurred in early June, market response was tepid.”
A Royal LePage survey conducted earlier this year by Leger indicated that 51 per cent of potential homebuyers would resume their search if interest rates decreased. However, only 10 per cent said a 25-basis-point cut would prompt them to jump back into the market. Around 18 per cent of respondents were waiting for a cut of 50 to 100 basis points, and 23 per cent said they needed to see a drop of more than 100 basis points.
“Not surprisingly, the quarter-point cut to the bank rate didn’t substantially improve the affordability picture,” Soper explained. “The tale the market tells as rate cuts get to the point of a material reduction in the cost of borrowing should be a very different one.”
According to the report, the national aggregate home price rose 1.9 per cent year-over-year to $824,300 in the second quarter of 2024, also marking a 1.5 per cent increase from the first quarter. This figure is derived from the company’s property data across 64 of Canada’s largest real estate markets.
Breaking it down by housing type, the national median price of a single-family detached home increased 2.2 per cent year-over-year to $860,600, while the median price of a condominium rose 1.6 per cent to $596,500.
Royal LePage forecasts that the aggregate price of a home in Canada will increase by nine per cent to $860,555 in the fourth quarter of 2024 compared to the same quarter last year.