With Canada’s policy interest rate now less than half of its peak of 18 months ago, Canadians continue to cautiously return to the real estate market.
While delighted that the Bank of Canada has reduced its benchmark overnight rate to 2.25% from a peak of 5% in May 2024, Canadians remain concerned about the economic recovery and ongoing impact of US tariffs on their local industries.
The fall market did not produce the anticipated volume of sales, but the Canadian Real Estate Association (CREA) says the lower interest rate environment will see the market turn the corner in 2026.
Its senior economist, Shaun Cathcart, described the 2.25% rate as being in “stimulatory territory”.
It is one of the reasons why CREA has predicted sales volumes will increase 7.7% in 2026.
The number of deals in October was 0.9% higher than the previous month of September. However, year-over-year, the result was 4.3% off the pace. That said, we had not gone through the drama of US tariffs 12 months ago.
CREA pointed out the number of deals has now risen for six of the last seven months.
So, there’s definitely a move back towards positivity in the minds of Canadians who want to find a new home.
CREA’s Mr Cathcart admitted progress for the property sector had to be judged through the prism of “ongoing economic uncertainty”.
The latest data shows the number of newly-listed properties dropped by 1.4% in October compared to September. The average sale price was flat at $690,195.
In a national context, the price declines in British Columbia and Ontario are dragging down the positive gains in Quebec, East Coast and the Prairies.
Mr Cathcart said: “If we continue into next year and see sales pick up and supply come down, we could very easily be back in a situation where, at the national level, you start to see some more significant price increases.”
The Royal Bank of Canada said in its market analysis that Vancouver, Fraser Valley, Calgary, Saskatoon and Montreal experienced notable increases in home resales. Modest declines were registered in Edmonton, Regina, Winnipeg, and Toronto.
“Increased inventory provided buyers with more options and greater negotiating power in Ontario, British Columbia and parts of Alberta,” said the RBC. “Softening labour markets and persistently poor affordability continued restraining purchases.
“We think recent interest rate cuts will draw buyers from the sidelines.”
Montreal was one of the brightest spots in the market. Referring to that city, the RBC said: “We estimate home resales rose more than 5%, seasonally adjusted in October from September. This would mark a break from the summer’s constrained activity if sustained. Low inventory and tight new supply compared to demand maintains strong competition between buyers, fuelling moderate price increases.”