Recent insights from the Royal Bank of Canada (RBC) reveal early signs of a turnaround in Canada's housing market, with Toronto potentially reaching a pricing bottom this spring.
In a report released last week, RBC noted that January marked the second consecutive month of increased residential transactions in major markets nationwide, hinting that the downturn from the spring of 2022 may have stabilized.
Economist Robert Hogue, author of the report, attributed this positive trend to interest rate drops for fixed-rate mortgages since November, which have sparked buyer interest. Moreover, the anticipation of a potential rate cut by the Bank of Canada has bolstered confidence among buyers, albeit cautiously.
While a more robust and sustained recovery is not expected until interest rates decline further, likely in the second half of 2024, Canada has yet to witness a surge in sellers due to higher borrowing costs. In fact, new listings have been relatively subdued, tightening demand-supply dynamics.
While prices have dipped in most major markets across Canada, Calgary stands out with prices maintaining an upward trajectory. RBC predicts a modest one percent nationwide price drop in 2024, with Alberta seeing a 2.2 per cent uptick and Ontario experiencing a two per cent decline.
Hogue remains optimistic about the Toronto housing market, noting signs of a potential turnaround. Factors such as recent drops in fixed mortgage rates and favorable weather conditions may have contributed to buyer activity.
However, the report emphasizes that stretched affordability remains a barrier for many buyers, and meaningful declines in interest rates or property values are needed to stimulate market activity significantly.
The average selling price of a Toronto home peaked in February 2022 before experiencing a decline later that year. Since then, prices have remained relatively stable, with some fluctuations noted last spring.
Toronto has seen six consecutive months of price declines, totaling a 7.2 per cent drop. However, RBC anticipates that prices will bottom out this spring and gradually recover over the second half of 2024, signaling a potential turning point for the market.
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