Ontario home sales are expected to jump by almost 10 per cent in 2025 due to pent up demand from buyers waiting for more interest rate cuts, potentially leading to “much stronger” momentum beginning next spring or summer.
The Canadian Real Estate Association’s (CREA) sales and price forecast shows a more stable real estate market next year after a sluggish 2023 and 2024.
In Ontario, annual sales dropped by more than 12.3 per cent in 2023 and saw a slight uptick of 1.5 per cent this year — that means with a 9.9 per cent sales increase forecast for 2025, sales will return to previous levels from a couple of years ago. Prices will see modest growth of 2.4 per cent.
“Markets now expect the Bank of Canada to get back to a ‘neutral’ rate by sometime next spring or summer,” the CREA report said.
In June, July and September, the Bank of Canada cut its key interest rate by 0.25 percentage points each time, bringing the key rate from 5 per cent to 4.25 per cent. Economists are now forecasting that a 0.5 per cent drop could occur with the rate announcement later this month.
National home sales are forecast to climb a further 6.6 per cent in 2025 as interest rates continue to decline and demand flows back off the sidelines, the report added.
However, CREA downgraded its housing market forecast for the remainder of the year, saying the Bank of Canada’s interest rate cuts haven’t spurred the gradual improvement it previously anticipated.
CREA says it now thinks the national housing market will remain in “more of a holding pattern” until next spring with 468,900 properties forecast to trade hands this year. That would mark a 5.2 per cent increase from 2023, down from its July prediction of a 6.1 per cent bump.
Following the Bank of Canada’s third interest rate cut of the year, national home sales increased slightly in September compared to August, which follows a similar pattern of gains recorded in the months following the first two rate cuts.
“Sale gains are now three for three in the months following interest rate cuts, which is a trend even though the increases weren’t headline-grabbing,” Shaun Cathcart, CREA’s senior economist, said in the release.
“That said, with the pace of rate cuts now expected to be much faster than previously thought, it’s possible some buyers may choose to hold off on a purchase for now. This could further boost the rebound expected in 2025 at the expense of the last few months of this year.”
Home sales climbed 1.9 per cent on a month-over-month basis in September 2024, reaching their highest level since July 2023. The national increase was led by the GTA, Hamilton, Burlington, Montreal, Quebec City, as well as Greater Vancouver and Victoria.
New listings posted a 4.9 per cent month-over-month increase in September, as sellers listed properties in “larger than normal numbers” for the first weeks of the month.
“The beginning of September saw a burst of new supply for buyers to choose from before things generally quiet down for the winter,” James Mabey, CREA chair, said in the release.
“While some buyers may choose to take advantage, others may be inclined to wait as the bulk of future rate cuts from the Bank of Canada are now expected to show up in a matter of months as opposed to years.”
With files from The Canadian Press
