Western Reader
Canada’s housing market is expected to see a moderate recovery in 2024, with the average price of a single-family home reaching $801,600 CAD. This follows a turbulent period marked by high interest rates, slow sales, and reduced affordability.
In the first half of 2024, the market is forecasted to remain subdued as the Bank of Canada keeps its policy rate at historically high levels. This has made homeownership unattainable for many potential buyers, resulting in reduced demand nationwide. However, a significant change is anticipated in the latter part of the year, as interest rate reductions are predicted to stimulate the market. Lower borrowing costs could unlock pent-up demand, especially among first-time buyers who have been unable to enter the market due to high financing expenses.
Right now, Canadian banks hold a lot of mortgage-related assets. If the housing market were to crash and many people defaulted on their mortgages, Canadian banks could face huge losses, just like the Japanese banks did. Even if the central bank lowered interest rates to zero, it… pic.twitter.com/QYobx4oWnn
— The Economic LongWave (@TheELongWave) August 10, 2024
Despite the challenging conditions, the average home price in Canada has displayed resilience, rising to $801,600 CAD. This represents a 2.5% year-over-year growth, attributed to factors such as limited supply, high construction expenses, and strong demand driven by population expansion.
According to the Canadian Real Estate Association (CREA), the national average home price is projected to further increase by 5% in 2025, indicating ongoing market recovery as borrowing conditions improve.
Even after 2 rate cuts houses are selling well below peak 2022 prices.
Welcome to the Canadian housing market. 🇨🇦 pic.twitter.com/gNlqfTI78n
— EconomicWoes 🦁 (@ManyBeenRinsed) July 30, 2024
Regionally, the recovery is expected to vary. Provinces like Alberta and Saskatchewan, where markets are showing improvement, are likely to lead the revival. Conversely, more costly markets such as Ontario and British Columbia are anticipated to experience slower growth due to significant affordability challenges. RBC Economics projects that while home sales in these areas will bounce back, they will still lag behind pre-pandemic levels.
The impact of high interest rates has been particularly felt in major urban centers, where homeownership costs have reached unprecedented levels. This has pushed more Canadians into the rental market, worsening the housing affordability crisis. The Canadian Mortgage and Housing Corporation (CMHC) has stressed the urgent need for increased housing supply, particularly in rentals, to alleviate renter pressures.
Looking ahead, the broader housing market is set to be busier in the latter part of 2024, with a 9.2% increase in home resales year-over-year. Nonetheless, the market is unlikely to return to the intense activity seen during the pandemic anytime soon. Experts caution that the recovery will be gradual, with affordability concerns continuing to impact the market. The Bank of Canada’s cautious approach to rate cuts, aimed at preventing a sudden surge in housing demand and subsequent price inflation, will also moderate the pace of recovery.
While the Canadian housing market is expected to bounce back in 2024, it will be a gradual and uneven process influenced by interest rates, affordability, and supply constraints. As the average home price approaches its previous peak, prospective buyers will face a challenging landscape where affordability remains a significant obstacle.
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