Canadian Housing Market Poised for 2025 Comeback as Lower Rates Unleash Pent-up Demand
Canadian real estate activity is expected to remain strong in 2025, despite a challenging affordability picture. The Canadian Real Estate Association reported a 26% increase in November home sales, marking the second consecutive month of gains at that level.
For the first 11 months of the year, cumulative home sales were up 6.9% compared to 2023. Re/Max Canada president Christopher Alexander expects a more robust year in activity and consumer confidence, especially with further anticipated rate decreases.
High interest rates have been a major barrier of entry for would-be buyers, but it is expected that lower rates in 2025 will revers that trend. Re/Max’s 2025 housing market outlook report predicts home sales to rise in 33 of 37 Canadian regions, including increases of up to 25%, and the national average residential price rising by 5%.
The Canadian real estate market is expected to experience a strong and resilient 2025, with a balanced-to-a-seller’s market. This is due to increased buyer confidence and an uptick in offers on homes. However, the pendulum has swung from the strong seller’s market of 2021 and 2022, and the rush will likely be exhausted in the first half of next year.
The national average sale price stood at $694,411 in November, according to CREA. The initial demand boom should push housing prices higher, but markets in Canada’s two largest provinces, Ontario and B.C., are still dealing with big supply backlogs that will take time to clear.
The federal government’s recent mortgage rule changes, which kicked in Dec. 15, should help lift home sales and prices. These measures included extending the maximum mortgage amortization period for first-time homebuyers to 30 years and raising the cap for obtaining an insured mortgage from $1-million to $1.5-million.
TD forecasts home sales will rise by 16% across Canada in 2025 on a year-over-year basis, while Canadian average home prices will go up 8%. Other factors, such as the labor market and political uncertainty, could also play a role in determining the housing picture next year. However, it is premature to compare the market to 2021 and early 2022 when activity skyrocketed, as rates are still not low enough yet.
Source: Globe and Mail
Source: The Star
Source: Financial Post
Bank of Canada Expects Home Sales to Pick Up with Latest Rate Cut, New Mortgage Rules
The Bank of Canada anticipates increased activity in the country’s real estate market due to the central bank’s latest interest-rate cut and easier mortgage policies set to take effect in January 2025. The bank’s latest 50-basis-point cut reduced interest rates to 3.25 per cent, its fifth cut since June. The lower interest rates have reduced borrowing costs and helped prospective homebuyers qualify for a mortgage. Sales have been slowly moving up, with transactions in October at their highest level in over two years.
The federal government’s looser mortgage policies will allow all buyers to put down smaller down payments on homes that cost up to $1.5 million and first-time homebuyers to pay off their loan over a longer period of time. The Bank of Canada senior deputy governor Carolyn Rogers said that she expects more pickup in mortgage rule changes, similar to many in the real estate industry, who expect sales to continue climbing through the year.
The lower interest rates and new mortgage rules will be in place before spring, which historically has been the busiest season for real estate sales. First-time homebuyers who take out an insured mortgage will be allowed to repay or amortize their loan over 30 years instead of 25 years, lowering monthly payments. Mortgage insurance is required if a down payment is less than 20% of the home’s purchase price, which protects the lender if the borrower defaults on their payment.
Source: Globe and Mail
National home sales, prices rose in November as buyers took advantage of cheaper interest rates
The Canadian Real Estate Association reported a 26% increase in homes sold in November 2024 compared to the previous year, marking the second consecutive month of large year-over-year gains. The national average sale price for November rose 7.4% compared to a year earlier to $694,411. The Bank of Canada’s last half-percentage-point cut marked the fifth consecutive time it has lowered its policy rate since June, bringing it to 3.25%. Rising home sales activity was driven by gains in Greater Vancouver, Calgary, Greater Toronto, Montreal, along with some smaller cities in Alberta and Ontario.
The national average sale price for November rose 7.4% compared to a year earlier to $694,411. The Bank of Canada’s latest 50-basis point cut and a loosening of mortgage rules could mean a more active winter market than normal.
National home sales rose 2.8% from October 2024 on a seasonally adjusted basis. The number of newly listed properties was down 0.5% month-over-month. At the end of the month, there were just over 160,000 properties listed for sale across the country, up 8.9% from a year earlier but still below historical averages for that time of year.
However, challenges persist, particularly affordability. With variable rates down and inventory up, buyers are striking before the iron gets hot. Some buyers may have chosen to get off the sidelines at the end of 2024 to avoid paying more this year when more demand could lead to higher listing prices.
Source: Globe and Mail
Source: The Star
Source: Financial Post
Source: CREA
Canadian Housing Starts up More than Expected in November 2024
The Canada Mortgage and Housing Corporation (CMHC) reported an 8% increase in the annual pace of housing starts in November 2024 compared to October 2024, largely due to the strength in multi-unit starts in Quebec, Alberta, and British Columbia.
The seasonally adjusted annual rate of housing starts reached 262,443 units, up from 242,207 in October. The increase was attributed to a 9% increase in urban starts to 245,083 units, a 11% increase in multi-unit urban starts to 195,281, and a 4% increase in single-detached urban starts to 49,802 units. Rural starts were estimated at 17,360 units.
November was a busy month for new home construction in Canada’s centres with a population of 10,000 or greater, with 22,345 actual starts, bringing the year-to-date total to 210,912.
Source: Globe and Mail
Source: The Star
Source: CMHC
