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The resale real estate was in a “holding pattern” in Canada’s major markets in May as many buyers were waiting for the expected cut in interest rates that came in early June, a new report has suggested. The study from RBC Economics found sales dropped or remained flat in most cities year over year, as new listings increased. The big outlier market, however, was Edmonton that saw sales increase nearly 19 per cent.
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The report’s author noted that many buyers are likely holding off purchasing until June, anticipating the Bank of Canada would cut its overnight interest rate by 25 basis points.
It did on June 5, the first cut since 2020.
More notably, the reduction in borrowing costs marks the first change in direction by the Bank of Canada, which had previously increased the interest rate by 450 basis points since March 2 to slow inflation.
The recent interest rate cut came as no surprise to would-be homebuyers, the report has suggested.
While they waited, however, new listings continued to flow onto markets across Canada in May. Paired with the drop in demand, average prices decreased in major markets such as Toronto (-3.5 per cent) and the Fraser Valley in British Columbia (-0.8 per cent).
Demand in Calgary, however, remained strong with prices up 9.5 per cent year over year, the largest percentage jump among the six markets in the study. Calgary also continues to be the nation’s tightest resale market with a sales-to-new-listing ratio of 76 per cent in May. Any measure above 60 per cent indicates a market favouring sellers.
Edmonton was the second most favourable market for sellers with a ratio of 70 per cent. In contrast, Toronto’s sales-to-new-listing ratio was 40 per cent, on the threshold between balanced conditions and a market favouring buyers.
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