Canada Housing Market Shift Offers Hope for First-Time Homebuyers
Royal Bank of Canada's latest forecast predicts a shift in Canadian housing market affordability, with potential for a faster recovery in the second half of 2024.
The Canadian housing market is expected to see a shift in affordability later this year, offering hope to prospective first-time homebuyers, according to a forecast by Royal Bank of Canada (RBC). The report released by RBC projects that the housing market will experience two different stories in the first and second halves of 2024. The Bank of Canada's benchmark interest rate is expected to keep housing activity muted in the first half of the year. However, a pivot to rate cuts mid-year could lead to a faster recovery, fueled by pent-up demand in the market.
The report also highlights the severe loss of affordability in the market, attributed to the run-up of home prices during the pandemic and the subsequent tightening by the Bank of Canada, which has led to a nearly two-year housing correction. RBC projects that while housing activity is set to rise annually over last year's levels, the home price index is expected to decline further this year before starting to climb in 2025.
RBC anticipates that home prices may not surge rapidly after rate cuts if supply continues to improve in the housing market. The influx of sellers could keep supply-demand conditions in balance and temper any upward pressure on demand. The report suggests that national home prices would remain below the peak seen in 2022, providing an opportunity for frustrated would-be buyers to find inroads into the ownership market.
With expectations for more substantial interest rate cuts in the second half of 2024, prospective first-time homebuyers could see affordability improve, especially for first-time buyers who may be more financially constrained. The report also notes that strong population growth will continue to sustain demand, despite the federal government's plan to cap international student permits for two years.
In terms of specific housing markets, the report predicts a modest rebound in sales levels in Canada's two most expensive housing markets, with B.C. and Ontario expected to "turn a corner by the summer." Prices are expected to continue to drop in certain provinces, while others are already showing signs of recovery.
The RBC forecast offers hope for prospective first-time homebuyers, suggesting that the Canadian housing market could see improved affordability and a more balanced supply-demand dynamic in the latter half of 2024.
Canada Housing Market Shift Offers Hope for First-Time Homebuyers
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