State of the Canadian Housing Market: Conflicting Polls Reveal Market Uncertainty Despite BoC Rate Cut

Oshawa, ON | Dillon Kydd

Written by Breck Hapner

Editor’s note: Welcome to the HAVEN State of the Canadian Housing Market series. Every month, we will share an update explaining details and projections related to Canada’s real estate sector to keep you informed.

The Bank of Canada’s (BoC) June 5th rate cut has not significantly motivated Canadians to jump into the real estate market. A June 11th Ipsos Market Research study reveals that 82% of Canadians who don’t own a home say buying one remains unaffordable. This poll, the first since the central bank cut rates from 5% to 4.75%, sought to gauge potential buyers’ reactions. According to Global News’s June 11th analysis of the Ipsos study, 63% of respondents said they would remain on the sidelines due to high interest rates.

Contrarily, a June 10th Bloomberg poll suggests rising consumer confidence, with widespread bullish sentiment toward real estate. This positive outlook is echoed in various media reports speculating that the BoC rate cut might boost demand.

For instance, a June 9th Financial Post article states that “Pent-up demand is expected to drive both sales and prices higher.” A June 6th Wealth Professional article leads with “Analysts say the Bank of Canada’s interest rate cut could encourage many homebuyers to re-enter the market.” A June 5th Globe and Mail article concludes that the “Royal LePage president predicts ‘material lift’ in home sales after BoC rate cut.” The extent to which the BoC can further cut interest rates largely depends on Canada’s Consumer Price Index (CPI) inflation data, which Statistics Canada is set to release on June 25th. With all this in mind, where does consumer sentiment really stand?

The aforementioned Bloomberg poll, showing consumer confidence at a two-year high, was reiterated on June 11th in a Canadian Mortgage Professional article, which stated, “Canadians are starting to feel a bit better about the state of the economy.” While most responses were collected before the rate cut, Bloomberg noted that the BoC’s move was “widely anticipated.”

Yet, a closer look at the June 10th Bloomberg/Nanos poll data reveals that only 49.1% of respondents expect real estate values to increase in the next six months. This figure, slightly declining from previous weeks, contradicts the narrative of rising consumer expectations.

Canmore, AB | Pierre Jarry

However, the Ipsos Market Research study highlights skepticism about the rate cut’s impact on housing affordability. In a June 11th Global News article, Ipsos poll results show that respondents feel “the quarter-percentage drop might be a ‘good start,’ but Canadians are feeling like there’s a long way to go before housing affordability improves for most.” Only 6% of non-homeowners would consider buying a home with a 0.25% to 1% rate cut. In addition, 25% would consider entering the market with a rate cut of 1% to 4%, while 45% remain unable to afford a home even with a more significant rate reduction.

According to the BoC’s April 22nd Market Participants Survey—First Quarter of 2024, in section 2.1, financial market participants forecast that the BoC’s policy interest rate won’t hit 4% until December 2024.

Ottawa, ON

Despite a June 12th article in Real Estate Magazine suggesting that lower interest rates could trigger more bidding wars and accelerate market activity in Canadian real estate, the Ipsos Market Research Study suggests otherwise. In fact, the findings are remarkably similar to those in a February 27th Royal LePage survey, which found that “51% of Canadians who put their home buying plans on hold the last two years say they will return to the market when [the] Bank of Canada reduces [the] key lending rate.” The poll also revealed that of the 27% of Canadians currently active in the market, 56% had postponed a home purchase due to interest rate hikes. Among those, only 28% would consider returning to the market if rates were cut by 25 to 100 basis points. Both polls show that a 25-basis-point rate cut wouldn’t bring a significant percentage of homebuyers back into the real estate market.

Analyzing the broader market impact, the Ipsos poll reveals concerns among mortgage holders, with 33% worried about their ability to make payments upon renewal. According to a June 11th article from the Toronto Star, late mortgage payments are surging, indicating potential increases in inventory as some homeowners may need to downsize.

Kitsilano, Vancouver, BC | Bruna Corchelli

To summarize, while the Bloomberg survey shows a rise in consumer confidence, the Ipsos poll indicates that Canadians are waiting for further rate cuts before re-entering the market. The anticipated activity boost in the summer months may not materialize, with buyers and sellers continuing to wait for more favorable conditions.

The Ipsos poll, showing that only 6% of non-homeowners plan to enter the market with further BoC rate cuts, aligns with current data. The expected 50-to-100 basis point rate reductions likely won’t occur until this winter at the earliest. A June 6th CBC video highlights significant mortgage renewal issues facing banks, with homeowners hesitant to engage in real estate activities until they access mortgage renewals, new inventory availability, and pricing trends. Thus, both buyers and sellers continue to face uncertainty.

In our next article, HAVEN will take a further look at the numbers: how Canada’s housing market is reacting to prevailing economic factors influencing real estate.