Regional real estate board statistics for June and July 2024 suggest that the Bank of Canada’s first two interest rate cuts have been insufficient to boost home sale activity, according to a new analysis by RBC Economics.
There was a small uptick in home sales between May and June, but the volume of transactions fell again in July.
The Bank of Canada made its first cut of 0.25% on June 5, bringing the rate down from 5% to 4.75%. This was followed by the July 24 cut of another 0.25% to 4.75%.
A growing number of economists are increasingly confident that the Bank of Canada will implement additional policy interest rate cuts before the end of 2024, given the ongoing trend of slower inflation, weakened consumer spending, and a slowing economy.
The next policy interest rate announcements are scheduled for September 4, October 23, and December 11, 2024.
RBC believes that it will take deeper rate cuts at these forthcoming announcements to “meaningfully reduce ownership costs and stimulate homebuyer demand more broadly” sooner than later.
Within Metro Vancouver specifically, RBC states “high interest rates exert tremendous stress on many existing homeowners (including investors), and a growing share may be forced to sell — fuelling supply.” Combined with the high cost of living issues, there are growing reports of missed monthly mortgage payments in the expensive markets of British Columbia and Ontario.
According to RBC, nearly 60% of Canada’s outstanding mortgages will be due and up for renewal over a three-year period between 2024 and 2026.
There is also a potential within Metro Vancouver for a “mild” price correction if the number of available listings continues to outpace demand. It is estimated new listings grew faster than home resales in the months of June and July 2024, and this could continue over the short term.
“A material drop in rates will eventually alleviate tensions all round, but that is likely months away,” states analysts.
While Greater Toronto is currently experiencing a buyers’ market, there is a “tenuous equilibrium” in Metro Vancouver.