(Bloomberg) — Canadian home sales were basically flat and prices dipped in March, a sluggish beginning to a spring market that some analysts believe will pick up soon as the Bank of Canada moves closer to cutting interest rates.
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The number of transactions nationally rose 0.5% in March on a seasonally adjusted basis after falling 3.1% in February, according to data released Friday by the Canadian Real Estate Association.
The benchmark home price fell 0.3% on the month to C$718,400 ($522,000).
Sales are currently about 10% below the average of the last 10 years. But housing demand appears set to accelerate in coming months as the central bank mulls lowering borrowing costs and Canada welcomes hundreds of thousands of newcomers every quarter.
Most economists surveyed by Bloomberg expect the central bank to cut in June, and traders are fully pricing a first cut by July. In a press conference Wednesday, Governor Tiff Macklem told reporters a June cut was “within the realm of possibilities” but said officials want to see more evidence that inflation is easing.
The number of newly listed properties fell 1.6% in March. A ratio of sales to new listings was 57.4%, slightly above its long-term average and in line with what the industry believes is a balanced market.
“While the official March monthly numbers were quite flat, anecdotal evidence from late last month and early April suggests activity is ramping up,” Larry Cerqua, the real estate association’s chair, said in a statement.
The Bank of Canada began raising its benchmark overnight rate in early 2022, triggering a slowdown in home sales and a drop in prices. Prices rebounded for a spell last year, and some observers see a sustained recovery on the horizon.
The bank’s April monetary policy report said a “moderate increase” in house prices is baked into its economic forecasts. But a sharp, unexpected increase in house prices is a key upside risk to the inflation outlook, the central bank said.
Policymakers anticipate “robust growth” in residential investment over the coming years, with strong housing demand driven by elevated population growth and tight supply.
While new construction has risen in recent years, housing starts have not kept pace with record immigration. Canada Mortgage & Housing Corp. estimates that 3.5 million more units, beyond what’s already projected to be built, will be needed by 2030 to restore affordability.
According to their updated 2024 forecasts, CREA expects home sales to increase 11% this year from 2023 levels to 492,083 transactions. They’ll rise another 7.8% next year, the group said, based on interest rates declining to “more normal” levels. The national average home price is expected to rise to C$760,120 in 2025.
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