What’s Happening With the Cottage Market, and Interest Rate Cuts Ahead?

This week’s top real estate stories.

By  Jared Lindzon | 2 minute read

Every Friday, Wahi brings you the most important real estate stories from the past week.

Inflation Dropped — Will Interest Rates Follow?

Inflation just took another step in the right direction, but before you break out the loan application, economists warn that it won’t necessarily lead to an interest rate cut in June. On Tuesday, Statistics Canada reported that the consumer price index rose at an annual rate of 2.7% in April, down from 2.9% in March, instantly boosting the odds of an interest rate cut in June. Economists, however, warn that the odds of a drop in the key interest rate from the current 5% level is about 50-50, as the Bank of Canada could opt for a more cautious approach.

A Tale of Two Cottage Countries  

2024 is the best of times and the worst of times for the cottage market, depending on your budget. According to a report from Royal LePage, recreational single-family home prices are expected to jump 5% this year, and 8% in Ontario, despite a significant drop in transactions. According to the report, the price increases are largely thanks to record activity at the very high end of the market, particularly among properties in the $8 million-plus range. Experts suggest that luxury sales are disguising an otherwise slow season in cottage country, as price-conscious consumers wait for interest rates to drop.

The Housing Market Giveth, the Housing Market Taketh Away  

Mortgage rates may be coming down but actual costs are increasing in a familiar Catch-22 scenario for Canadian buyers. According to a Ratehub.ca report ,five-year fixed mortgage rates dipped from 5.62% in March to 5.5% in April. The slight improvement in borrowing costs, however, was accompanied by an even bigger increase in home prices, making it tougher to qualify for a mortgage in 10 out of 13 major markets. While it got a little easier to qualify for a mortgage in Montreal, Vancouver, and Victoria, it got a lot harder just about everywhere else, especially in Maritime cities.

Why More Construction Workers Hasn’t Led to More Housing 

Like a troubled highschooler, Canada is struggling to reach its full potential — and authority figures are losing their patience. The country is consistently coming up short when it comes to new home construction, and an analysis by the Canadian Mortgage and Housing Corporation offers an explanation. According to the report, Canada employed a record-breaking 650,000 construction workers in 2023, which should be enough to build about 400,000 homes per year. Last year, however, the industry came up short, producing just 240,000. The report says the “fragmented” industry will need greater coordination and more longer-term solutions to achieve Canada’s national housing targets.

Out With the New, In With the Old  

Ontario residents are abandoning the dream of homeownership — or at least the dream of owning a new home. According to a study by Tarion, as many as 250,000 Ontarians abandoned the new home market in 2023, with 34% fewer respondents considering a new home, and 11% “not likely at all” to ever buy one, up from 7% in 2022. The report also found that new home sales dropped sharply year over year — from 73,383 in 2022 to just 54,352 last year — especially in Toronto’s condo market, which dropped 85% in the first quarter of the year compared to Q1 2022.

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