Despite expectations of lower interest rates prompting homebuyers to leave the sidelines, a new report says the Bank of Canada’s quarter-point cut to its key interest rate last month did not lead to a rush in demand.
The latest Royal LePage house price survey released Thursday, detailing market trends across Canada during the second quarter, said demand continues to outpace supply in the Prairies and Quebec, but Toronto and Vancouver saw slower-than-usual activity this spring.
Phil Soper, president and CEO of Royal LePage, said prices have remained sticky in Canada’s largest markets.
“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,” Soper said in a press release.
“Yet, when that first cut finally occurred in early June, market response was tepid.”
A Royal LePage survey conducted by Leger earlier this year suggested 51% of would-be homebuyers would resume their search if interest rates decreased, but just 10% said a 25-basis-point cut would prompt them to jump back into the market.
Around 18% said they were waiting for a cut of 50 to 100 basis points, and 23% said they need 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,” said Soper.
“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.”
The national aggregate home price rose 1.9% year-over-year to $824,300 in the second quarter of 2024, which was also a 1.5% increase from the first quarter, according to the report.
The figure is compiled from the company’s property data nationally and regionally in 64 of Canada’s largest real estate markets.
When broken out by housing type, the national median price of a single-family detached home increased 2.2% year-over-year to $860,600, while the median price of a condominium increased 1.6% to $596,500.
Royal LePage is also forecasting the aggregate price of a home in Canada will increase 9% to $860,555 in the fourth quarter of 2024 compared to the same quarter last year.