A 'for sale' sign outside a home in Toronto.Carlos Osorio/Reuters
Royal LePage president Phil Soper is forecasting an increase in home sales and prices after the Bank of Canada made its first interest-rate cut in four years.
Housing market activity has been subdued while the central bank was hiking rates. Sales have been below the 10-year average for about two years, especially in normally busy markets such as Toronto.
“It’s been four long years since Canadians have experienced a policy-driven drop in the cost of borrowing,” Mr. Soper said in a text message to The Globe and Mail.
He said the small rate cut and stronger consumer confidence will generate a “material lift” in sales and “accelerated home price appreciation.”
Although the central bank cut its benchmark interest rate by only a quarter of a percentage point to 4.75 per cent on Wednesday, the real estate industry expects it will give buyers confidence that borrowing costs are on their way down.
Many residents had put their house hunting on hold because they were uncertain about the direction of interest rates.
The typical home price across the country has remained steady for months, according to data from the Canadian Real Estate Association, although some cities have started to see home values increase. That includes places such as Calgary and Edmonton where home prices had been depressed due to the fallout from the oil price bust, as well as areas such as Chilliwack, B.C., and Barrie, Ont., where property prices spiked during the pandemic’s real estate boom.
Announcing the decision to lower interest rates, Bank of Canada Governor Tiff Macklem said the bank did not want monetary policy to be more restrictive than it needs to be to get inflation back to its 2-per-cent target.
But at the same time, Mr. Macklem warned that if the central bank cuts interest rates too quickly, it could “jeopardize the progress we’ve made.” He singled out rapid home price escalation as a factor that could drive inflation higher.
The last time home prices rose steadily was in early 2023 after the Bank of Canada said it would take a break from raising interest rates. The housing market’s quick rebound appeared to surprise the central bank, which cited the growth in home prices when it increased interest rates twice last summer.
This time around, the central bank’s senior deputy governor, Carolyn Rogers, acknowledged that buyers have been waiting to get back into the market.
“It’s clear there is some pent-up demand in the housing market. We’ll see how it goes,” she said at a news conference.