Early reports from real estate boards across the country suggest spring is bringing renewed life to Canada’s housing market.  Activity, on both the buying and selling sides, was up in several major centres in April, compared to March.

House hunters appear to be encouraged by the Bank of Canada’s pause to interest rate increases.  But Canada’s interest rate policy is not entirely within its own control.  Bank of Canada governor Tiff Macklem has warned that further turmoil in global banking could bring the BoC off the sidelines, and he has not ruled out further rate hikes.

Sellers may be returning based on a sense that price declines have bottomed out and they are listing their property into a rising market.  New listings are still not keeping up with demand and competition for properties remains stiff – which often results in bidding wars.  That combined with current, higher interest rates means affordability remains a major roadblock to home ownership, especially for first-time buyers.

Despite the recent month-over-month gains and, seemingly, on-going price pressures both the Canadian Real Estate Association and the Canada Mortgage and Housing Corporation are forecasting an overall price decline for 2023, compared to the peaks hit in 2022.  However, neither organization expects prices to drop back to pre-pandemic levels.  Both are calling for a resumption of price increases in 2024.

CREA and CMHC point to increasing immigration as a key driver of housing demand.  CMHC is also forecasting a decline in construction of new homes.  It cites on-going labour shortages, the high cost of materials and higher financing costs brought on by higher interest rates.

Published by First National Financial

The latest measure of Canada’s economy suggests that the widely anticipated slowdown is arriving.

Statistics Canada reports that Gross Domestic Product (GDP) grew by a mere 0.1% in February, down from 0.6% in January.  GDP is the total value of all goods and services produced by the economy.

That kind of pullback would normally be seen as bad news, but it is what the Bank of Canada has been hoping for as it works to bring inflation under control.  The central bank has been raising interest rates in an effort to discourage borrowing and buying. The slowing economy suggests that it is working.  With people and businesses buying less stuff, supply should be able to catch up to demand and price increases should also ease.

It also means the BoC is under less pressure to continue raising rates, which will be welcome news for anyone shopping for a mortgage.  Many market watchers expect the latest GDP numbers will keep interest rate hikes on ‘pause’ for the rest of the year.

Early estimates for the March GDP reading have the economy actually contracting by 0.1%.  April GDP is also expected to be weak, due to the federal workers’ strike.

Currently, the Canadian economy is growing at an annualized rate of 2.5%, which is in line with Bank of Canada estimates.  But analysts say the slowdowns forecast for March and April will likely mean flat or negative GDP readings for the second quarter of this year.

The contraction is not expected to be big enough to trigger interest rate cuts.