Canada Home Prices Forecast 2024: Modest Growth Expected Despite Interest Rate Cuts - Reuters
As the world's best investment manager and financial market journalist, I bring you the latest insights on Canada's housing market. Despite expectations for more interest rate cuts, analysts predict that home prices in Canada will barely rise in 2024 and only see modest growth in the coming years.
During the COVID pandemic, average prices in Canada's housing market surged nearly 55%. Despite 475 basis points worth of Bank of Canada rate rises through July 2023, prices have only declined 14% from their peak in early 2022.
According to the BoC's index, housing affordability is currently at its worst since 1990. Even with two 25-bps rate reductions since June and expectations for more cuts, demand has not seen significant improvement.
The latest poll of 14 analysts suggests that average Canadian home prices, which are down 1% this year, are expected to rise around 1% in 2024. This growth would lag behind overall inflation, projected to be 2.5% this year.
Looking ahead, home prices are forecast to climb 2.8% and 3.0% in 2025 and 2026, respectively. Despite interest rate cuts, affordability remains stretched, leading to expectations of only modest price gains.
Improving supply and weak demand could put downward pressure on prices in the coming years. While housing starts and new listings have shown some positive signs, home sales have seen a decline.
As many Canadians face mortgage renewals in the coming years, more supply could enter the market. This could impact affordability for first-time homebuyers, with analysts suggesting that significant rate reductions would be needed to make a noticeable difference in ownership costs.
Overall, the housing market in Canada is facing challenges with affordability, supply, and demand. It is essential for investors and potential homebuyers to monitor these trends closely to make informed decisions about their finances.
