Canadian real estate markets aren’t firming up with rate cuts—demand is softening. RBC is warning investors that early data shows rate cuts failed to stimulate major markets in July. In fact, they generally observed the opposite trend—sales continued to weaken while inventory climbed, as investors try to lighten their market exposure in key regions like Toronto.
Canadian Real Estate Markets Weaken Further Post-Rate Cuts
The Bank of Canada (BoC) rate cuts marked a turning point for real estate, according to RBC. Not because of what the markets did, but because of what they didn’t—neither the June or July rate cuts were able to stimulate buyers psychologically.
“After a small uptick between May and June, home resales fell again in some markets including Vancouver, Calgary and Toronto in July, according to early reports from local real estate boards,” explains Robert Hogue, Assistant Chief Economist at RBC.
The bank doesn’t see recent cuts stimulating much demand. They believe much deeper cuts will need to be seen before mortgages are cheap enough to stimulate markets.
Canadian Real Estate Generally Saw Demand Weaken As Supplies Rise
Only a handful of major markets have reported July data, but the ones that have, show a slow market. That appears to be amplified by price distribution, with more expensive markets seeing slow sales and much higher inventory levels.
The supply and demand balance remains tight in Calgary, Edmonton, and Montreal—where sellers retain the power, potentially meaning higher prices in the future. Vancouver and Fraser Valley find themselves in balanced markets, with supply and demand balanced at the current price level—though slipping towards buyers. Toronto was the only region to plunge into oversupplied territory, implying lower prices may be needed to get inventory flowing.
Source: RBC.
Virtually all markets in the group have seen conditions ease from last year. Annual growth of new listings outpaced that of sales in Toronto, Vancouver, Calgary, and Fraser Valley. Edmonton was an outlier with sales significantly outpacing new inventory. Last but not least was Montreal, where sales just outpaced listings.
Source: RBC.
The reason for the sudden surge of inventory varies, according to RBC. However, markets are currently being driven by two factors—investors pulling some off the table and sellers that thought rate cuts would end the downturn.
“In some cases, such as in Toronto, it reflects the completion of many newly built units (mainly condos) that owners (mainly investors) are looking to offload. In other cases, it could be sellers betting lower rates will spur buyer interest and improve sale outcomes. In some, it may signify homeowner distress arising from high rates,” Hogue explains.
In any case, the bank continues to see the market sputtering over the next few months. They repeated that much larger rate cuts will need to be observed for any material impact on demand.
How many years of purchasing did they pull forward? Because that’s the answer on how long this takes to fix.
Realistically, what’s the plan in Canada. Every generation is just going to sell a home for the cost of a home plus their retirement? Like a perpetually long debt ponzi?
Nah, of course that’s not the plan. The pensions purchased a reverse mortgage lender, so it stops with the current generation when they borrow high interest loans to find a small portion of retirement, that will compound and eat up their total equity.
DUMP EVERYTHING YOU OWN IN CANADA – BUY NEW USA HOUSES FOR LESS THAN 400K
So you can take any profit to pay for your medical coverage/bills?
No thanks.
CANADA IS FULL OF MISGUIDED BROKE LOSERS
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If lower interest rates are coming, why buy now.
Wait for the lower interest rates and get a lower interest rate mortgage.
Answer: Asset inflation. Low interest rates don’t make the purchase cheaper. They just make the financing less painful. In the end, homes become more expensive because in the long run, most homeowners don’t factor in a key factor called “functional/energy obsolesence” which means unless you can sell your home for profit before you have invested in any other upgrades other than cosmetic, you also have another carry cost of living in the said home. So unless the asset inflation outpaces the cost to maintain the home (which is unlikely under the current conditions) not many home that are 20 years or older would qualify as “investments”. This wasn’t as much a factor in the last 10-15 year run, but it is now. Unless you think that a 1200 sq. foot bungalow worth $1M will be 1.5M in five years from now in any given market. Good luck with that.
Investors are spooked, only sharks and hungry bears left looking for deals. Last one out holds the heaviest bag. Unless they bought 10+ years ago, everyone will be luck to take a 100k haircut at those crazy precon prices.
Interest rates do little in a falling market. I noted a fall of 5% was stated for GTA last month. Maybe the real crash is about to happen. Prices might just fall off a cliff. Where is the bottom, could be 3 times earnings, as was normal in the past. might even go below 3 times earnings for a while. Demand will eventually push prices back up but that might take a while and prices might never return to current 10 times earning levels.
All the comments I see expect a 10 % to 20 % fall over the next year could be right, but then again its possible that property could be down to 25% of current prices in the near future. The key is always the rate of fall, at 5% a year fall you will still get buyers, at a 20% fall per year there are very few buyers. We are drifting into that 20 % area and that is when the bottom will fall out of the market.
Not sure who thought that the 1/2 point total reduction so far would stimulate anything. We have an exodus of investors who simply can no longer afford 5% plus rates while owning rental properties. The choice is simple, sell, even if it’s at a loss. Just had a client do this exact thing, they were happier to take a 40k loss than continue to pay 4600+ a month mortgage. When they purchased in 2019, that same mortgage was $1800. We have no mom and pop investors anymore as rents simple will not cover costs, not even close to it. Those same investors have seen drops in the equity of their principal homes as well, so double whammy, 15-30% loss in value and a 200%+ cost increase in carrying a HELOC, which most utilized to invest, simple math folks.
Probably anyone that can do math since that’s 15% more leverage. Now I’m not sure why so many people fail to realize that every bubble has popped with falling rates at the same time too.
Salty tones!
Start with the possibility of a home equity tax. That in itself before the fall session would cause many to jump ship as we are seeing now. Yes prices are too high driven by investors bidding against legitimate families looking to buy a home not to mention known money laundering.. The “Investors” have caused this conundrum and can claim their losses . They are playing with their own money, have driven prices out of reach for many in that wages are nowhere near commensurate with current market conditions. That explains the affordability issue. “Investors” have caused, and are the problem. Canadians are broke and Canada is in at minimum a recession no matter how they fudge the numbers.
What is 15% more leverage going to do when they are already in the hole 20-30% on equity, and thier rates have gone up 200-300%? The issue is affordability, That 1/2 point drop does nothing for affordability or ability to qualify at over a 7% rate on a stress test.
In this market, there are very few investors as many relied on HELOC’s to invest, that cost is now way to high, plus equity drop in thier principal residences make it more difficult from an affordability standpoint. They are not bidding against legitimate families, they are not bidding at all. Cash buyers are king right now, unfortunately there are not very many of them. As for investors “causing ” this, if it were not for them investing in the housing market, there would a bigger housing issue, and a rental market that would be even worse than what we have as no one else is investing to provide rental market units. The blame falls flat on the shoulders of the Feds, failure to deal with a housing crisis, an immigration policy that is out of control and putting a restriction on purchasing by those immigrants they are allowing in by the 100’s of thousands.
In the late 89′, early 90…as a mortgage underwriter..I witnessed condos fall 50% in a year and single family dwellings by almost as much. Rates were around 10% back then but people bought on the false hope of quick appreciation. The only thing keeping the market alive right now is the banks willingness to reverse amortize renewals otherwise the glut would invite panic. Good luck to the greedy fools!
That’s exactly what’s keeping this bogus market afloat!
No brainer – investors have ditched Canada to buy new houses in the USA for less than 400K.
So between 2015 and 2024, housing prices on average in Canada more than doubled. IN 9 years that’s a 8+% RISE compounded annually. During that time nominal gdp per capita was 44.1k in 2023 vs 43.6K in 2015 Thats a net change of 1,1% over the same period?
So what happened was the govt, developers, banks and realtors used artificially high growth in the housing market to pretend they had GDP growth? The worst part, with Real estate now being the biggest single sector in our economy, up PAST 40% OF OUR GDP. In 2014 that was 17% of our GDP?
To put this in perspective in 2014, the single biggest sector in our economy was Resource extraction (mining, O&G) at 30% of our 2014 GDP. By 2024 that number has dropped to 5%?
Now peo0p-le will say, but you know our GDP went up didnt it? Well no it really didnt. If you take housing at 17%, of 2014 GDP thats $310B, and Resources were $555B. Today with a GDP of 2.08B (vs 1.85B in 2015), housing is now $827B, more than doubled, and Resources are down to 105B (or down 80%!!!)?
The problem is housing is an inflationary asset. Artificially increasing housing prices without consummate GDP gains is just a way to debase the currency. This is why we feel poor, there are roughly 2.4 2024 dollars for every 2015 dollar. The other problem is that resources generate a positive balance of trade, housing does not. So in effect our exports, and therefore, forex, dropped by $445B since 2015?
So if we look to exports, in 2000 our GDP was 45% exports. Today its about 30%? So clearly all this monkey business with green transition has severely damaged our economy, and Trudeaus trickle down housing inflaiton program has not helped anyone other than a few at the very top?