OTTAWA--Canada's property market ended 2024 on a sour note, but sales of existing homes are expected to rise strongly this year and prices are on track for gains thanks to pent-up demand and a drop in borrowing costs.
National home resales dropped 5.8% in December from the previous month, the Canadian Real Estate Association said Wednesday. That marked the largest decline of the year and was sharper than the 2.2% pullback expected by economists after higher sales the previous two months followed a jump in supply in early fall.
Early figures from local real estate boards showed a mixed finish to the year for major housing markets as resale transactions fell in Toronto and in Calgary, Alberta, but continued to recover in Vancouver and in the Fraser Valley in British Columbia.
Still, countrywide activity in the last month of 2024 was about 19% above year-earlier levels. And sales for the fourth quarter were up 10% on the prior quarter for one of the strongest periods in the last 20 years, excluding a surge in activity in the early years of the pandemic.
Shaun Cathcart, the association's senior economist, said the latest quarter offers a preview of what the market is expected to look like this year.
"Our forecast continues to be for a significant unleashing of demand in the spring of 2025, with the expected bottom for interest rates coinciding with sellers listing properties for sale in big numbers once the snow melts," he said.
The association anticipates that the usual burst in spring listings, alongside two and half years of pent-up demand and lower interest rates, will drive a jump in the housing market across the country. The central bank has lowered its benchmark rate five times since June as inflation has eased.
Most economists expect further easing early in 2025, though Bank of Canada policymakers signaled a pivot to a more gradual approach to monetary policy after a second outsize cut in December.
The Canadian Real Estate Association said the central bank might soon indicate rates are about as low as they are likely to get this easing cycle, which could spur even more demand from Canadians who have been waiting for the right time to lock in a fixed-rate mortgage.
The association forecast an 8.6% jump in listings for residential properties this year, slightly more than the 6.6% increase it projected in the fall. It expects the average home price nationally will climb 4.7% on an annual basis.
Next year, it expects sales to climb a further 4.5%, while the average price is set to rise by 3.3%.
There is a risk that years of building demand all shows up at the same time rather than being spaced out over time, though there is downside to forecasts if a trade war with the U.S. breaks out, the association said. President-elect Trump has said he plans to impose a 25% tariff on all imports from Canada, a move the Canadian government has said it would fight back against, something economists estimate could drive Canada's economy into a recession and would stoke inflation in the U.S.
With the fall in sales of existing homes last month, new listings also slipped for a third straight month since a jump in supply in September.
The association's data indicated that benchmark house prices, calculated in a similar fashion to the S&P CoreLogic Case-Shiller National Home Price Index, advanced 0.3% from the prior month. That marked a second consecutive monthly increase.
The average price nationally stood at 676,640 Canadian dollars ($471,550), not seasonally adjusted, up 2.5% on a year earlier.
Robert Kavcic, senior economist at Bank of Montreal, said conditions were mixed to end 2024, with activity firm in much of the country but weak in the province of Ontario and with the Toronto condo market still awash in supply.
"When we hear about swampy market conditions and stagnant prices well off the 2022 peak, that is largely an Ontario story and even more specifically a condo story. At the same time, there are now regions of the country where housing market activity and resale prices are legitimately strong," Kavcic said.
Shelter costs are the largest component driving inflation in Canada, which eased to 1.9% in November and has been at or below the Bank of Canada's 2% target four months running.
Central bank policymakers will be watching closely to see whether the interest rate cuts in 2024 result in significant increases in home selling prices, Desjardins economist Kari Norman said. "So far they have little to worry about."