Experts anticipate a rise in Canada’s home prices this year, with expectations of further increases in 2025, according to Reuters. This prediction comes amid continuous strong demand for housing and a notable lack of new supply, coupled with the likelihood of interest rate cuts later in 2024.

The surge in Canadian home prices by over 50% during the pandemic was fuelled by exceptionally low interest rates and a scramble for more spacious living by homeowners. However, a subsequent 14% drop from the peak in early 2022 highlighted a cooling period. This cooling, in the face of an ongoing housing shortage, was attributed to the dampening effect of higher mortgage rates and steep prices, which sidelined many potential buyers.

Lately, a slight dip in mortgage rates—spurred by expectations of the Bank of Canada trimming rates after its aggressive hikes—has nudged some buyers back into the market. A Reuters poll involving 17 analysts predicts a modest 1.2% increase in average home prices this year, following a 5.5% decline last year, with an anticipated 3.3% rise in 2025.

“This winter’s renewed market vigour is making it a more competitive environment for buyers… we think a pivot towards rate cuts mid-year will get the wheels turning faster over the second half, perhaps even sooner,” Robert Hogue, assistant chief economist at RBC, told Reuters.

“There will be a lot of pent-up demand to satisfy once confidence returns, which could heat things up in a hurry. However, poor affordability conditions will restrain the recovery and make it a gradual liftoff.”