Overview of the Canadian Housing Market Forecast

Canadian home sales are poised for a significant rebound, largely driven by improving economic conditions and new federal policies, as outlined in the latest report from TD Economics. The forecast suggests a surge in both sales and prices, particularly in early 2025.

Economic Factors Influencing Home Sales

Economist Rishi Sondhi highlights that the Bank of Canada (BoC) is anticipated to lower interest rates further, thereby stimulating economic growth. These changes, combined with new mortgage regulations, create a favorable environment for a notable increase in resale activity across the nation.

Sales Projections

TD projects that annual home sales will grow by an impressive 5.4% nationally by the end of 2024 and then skyrocket by 16.6% in 2025. The first half of 2025 is expected to witness 'powerful gains' in both the volume of Canadian home sales and average home prices.

Regional Price Differences

However, the growth in prices will showcase considerable regional differences. The overall forecast indicates a 1.3% national price increase by the end of 2024, escalating to 6.9% in 2025. Notably, affordability challenges will temper price increases in many markets, despite the upswing.

Deloitte’s Economic Outlook

Deloitte’s fall economic outlook aligns with this positive perspective, stating that with home prices significantly lower than their peak in 2022 and declining mortgage rates, an uptick in sales activity is likely to commence in the last quarter of this year. Strong growth is also predicted for 2025 and 2026 as sales return to historical averages.

Buyer Sentiment and New Policies

A key reason behind the anticipated surge in 2025 includes many prospective buyers waiting for further interest rate cuts from the BoC and the implementation of new federal mortgage policies. Sondhi emphasizes that the stagnation in average home prices since summer has not deterred buyers from entering the market.

Changes in Insured Mortgage Coverage

Excitingly, the new policies will extend insured mortgage coverage to homes valued up to $1.5 million, up from the previous limit of $1 million. This change will lower the minimum down payments required for homes in that price range. Additionally, first-time homebuyers and buyers of new constructions will gain access to 30-year amortizations, either boosting their purchasing power or lowering monthly payments—a move expected to invigorate the housing market.

Provincial Insights

In British Columbia and Ontario, where homes valued between $1 million and $1.5 million are most prevalent, the proposed measures could result in a staggering sales growth of 23.2% in B.C. and 23.9% in Ontario in 2025. However, price increases in these regions are anticipated to be modest, remaining below 5% due to imbalances between supply and demand and persistent affordability challenges.

Comparison with Prairie Provinces

Contrastingly, the prairie provinces may experience greater price growth, fueled by tight housing markets, robust population growth, and favorable economic conditions. In Quebec and the Atlantic provinces, where supply is limited, prices are expected to rise, albeit with potential affordability issues to watch out for.

Risks and Uncertainties

Sondhi cautions that the response of Canadians to the new mortgage policies remains uncertain, posing a risk to the forecasts. He notes that the housing market could react more dramatically than predicted, especially in a declining interest rate climate.

Conclusion and Future Outlook

Overall, the outlook for population growth—which directly affects housing demand—remains nuanced, with TD's growth projections being more conservative than those of the BoC. This evolving landscape of Canadian home sales presents both opportunities and challenges for buyers and sellers alike. Keep your eyes peeled as 2025 promises to be a game-changer in the real estate sector!