Housing affordability concerns prompt government action as new listings rebound. Canadian home sales saw a decline in August, marking the first full month of data since the Bank of Canada’s recent interest rate hike. However, new listings continued to rebound, according to data from the Canadian Real Estate Association (CREA) released on Friday.
In August, home sales in Canada dropped by 4.1% compared to July, but they were still up by 5.3% on an annual basis. The Bank of Canada had previously raised its policy rate in July to a 22-year high of 5% but left it unchanged earlier this month.
Shaun Cathcart, CREA’s senior economist, explained, “August was the first full month of housing data following the Bank of Canada’s July rate hike, so a dip in activity was expected.” He noted that while the dip may be temporary, the demand for housing remains strong. Cathcart added, “But as the housing affordability crisis re-emerges as a top policy issue, for now, the slowdown on the buyer side should help keep a lid on prices.”
Government Action on AffordabilityTo address concerns about housing affordability, Canadian Prime Minister Justin Trudeau announced on Thursday that his government will eliminate the federal 5% sales tax on the construction of new rental apartment buildings. This move is part of broader efforts to make housing more accessible and affordable for Canadians.
Steady Home Prices and New Listings Despite the dip in home sales, CREA’s Home Price Index showed a modest increase of 0.4% on a monthly basis and was also up by 0.4% on an annual basis. Additionally, the national average selling price saw a 2.1% year-on-year increase.
New listings in Canada rose by 0.8% in August compared to July. This increase contributed to a cumulative gain of more than 24% between March and July, indicating a growing supply of homes on the market. This surge in new listings brought the market closer to average levels after starting off 2023 at a 20-year low.
Larry Cerqua, chair of CREA, commented on the changing dynamics of the housing market, stating, “With sales slowing and new listings returning to more normal levels, demand and supply are continuing to come into better balance.” This shift toward a more balanced market could have implications for both buyers and sellers.Affordability Remains a Key Issue
Housing affordability has become a pressing concern in Canada, particularly in major urban centers like Toronto and Vancouver. Skyrocketing home prices and fierce competition in the housing market have made it increasingly challenging for many Canadians to enter the real estate market.
The Bank of Canada’s interest rate hikes were aimed at curbing inflation and cooling down the housing market, but they have also raised questions about the impact on homebuyers. The government’s decision to remove the sales tax on new rental apartment buildings is one of several measures aimed at addressing this issue.
Market OutlookThe future of Canada’s housing market remains uncertain. While the recent dip in home sales could be attributed to the interest rate hike, it’s unclear whether this trend will persist or if demand will rebound in the coming months.
Buyers and sellers alike will be closely monitoring the market, hoping for a more balanced and affordable real estate landscape. The government’s commitment to addressing affordability concerns is a step in the right direction, but the effectiveness of these measures will become clearer over time.
As the Bank of Canada and the federal government continue to navigate the complex dynamics of the housing market, Canadians will be watching closely to see how these actions shape the future of homeownership and affordability in the country.