Canada’s Housing Market to See Gradual Increase in Activity by 2024

A new report by RBC Economics projects a "tale of two halves" for Canada's housing market in 2024, with potential rate cuts and pent-up demand driving a summer uptick in activity.

Canada’s housing market is projected to experience a gradual increase in activity towards the end of 2024, according to a new report by RBC Economics. The report suggests that the market will see a “tale of two halves” this year, with interest rates expected to be lowered midway through the year. The prolonged period of high rates has led to pent-up demand for homeownership, and as consumers regain confidence alongside potential rate cuts, the market could see a significant uptick in activity this summer.

RBC Economics forecasts that the Bank of Canada will decrease its key interest rate from five per cent to 4.75 per cent at its June 5 meeting, followed by another drop of 25 basis-points to 4.5 per cent in July. Despite expectations of rate cuts and a rise in activity, the report highlights ongoing affordability concerns that will continue to hinder the market’s recovery. The report suggests that a “gradual liftoff” is more likely, as poor affordability conditions persist. It is anticipated that the larger window of opportunity for buyers will only open after interest rates have dropped significantly, which is expected to occur in the latter stages of 2024 or into 2025.

The report also notes that sales prospects are expected to improve as the year progresses, attracting more sellers into the market. Additionally, mortgage renewal payment shocks could prompt more owners to sell, further impacting market activity.

While the Canadian housing market is expected to see a gradual uptick in activity towards the end of 2024, ongoing affordability concerns are likely to slow the recovery. The potential rate cuts and rise in activity may heat up the market this summer, but a significant improvement in affordability conditions is anticipated to occur later in the year or into 2025.