Real estate signage is shown in Oakville, Ont., on May 11.Richard Buchan/The Canadian Press
Canada’s national real estate association has slashed its sales forecast for the year following slower-than-expected activity in the spring.
Sales are now expected to increase by 6.1 per cent to 472,395 transactions from 2023 to 2024, according to July forecast from the Canadian Real Estate Association, or CREA. That’s less than the association’s April prediction that annual sales would climb 10.5 per cent when it looked like the market was starting to ramp up after months of weak activity.
Now with more homeowners putting their properties up for sale, CREA said the number of listings has built up more than expected. Even though that means more choice for buyers, they have “remained on the sidelines,” CREA said.
Keisha Johnson, a mortgage broker with RTS Mortgage Financial in the Toronto region, said her clients are not facing much competition as they search for a new home. She said the only thing that might encourage buyers is lower interest rates. “The current monthly payments are just too high,” she said.
Although the Bank of Canada lowered its benchmark interest rate by 25 basis points to 4.75 per cent early June, buyers did not rush back into the market.
The typical home price in Toronto, the country’s most populated city, is more than $1-million and many borrowers either do not qualify for a large enough mortgage or are unable to afford the monthly payments.
Additionally, the interest rate cut only had an immediate effect on variable-rate mortgages, which are currently more expensive than fixed-rate mortgages and have been falling out of favour with borrowers.
New listings have been on the rise since December, with numbers climbing another 1.5 per cent from May to June after removing seasonal influences, according to CREA. That pushed up the number of active listings by .05 per cent over the same month.
Toronto-Dominion Bank economist Rishi Sondhi speculated that perhaps homeowners were trying to list their properties in June before the higher capital-gains tax took effect June 25. But in order for a homeowner to pay the lower tax, they would have had to close before that date.
The latest data from CREA show that sales rose 3.7 per cent from May to June on a seasonally adjusted basis, while the average price fell by 0.4 per cent to $696,179 over the same time period. The average price was 1.6 per cent lower compared with a year ago.
CREA also cut its price forecast for the year. It now expects the average price to increase by 2.5 per cent to $694,393 from 2023 to 2024. Its previous forecast was for the average home price to increase by 4.9 per cent.
Although sales picked up last month, CREA does not expect a torrid end to the year.
“The second half of 2024 is widely expected to see the beginnings of a slow and gradual return of buyers into the housing market,” CREA chair James Mabey said in a news release.