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Even with BoC's rate cut, Canadian homebuyers expected to remain on sidelines

  //house-home.news-articles.net/content/2025/10/2 .. -homebuyers-expected-to-remain-on-sidelines.html
  Published in House and Home on Wednesday, October 29th 2025 at 18:24 GMT by The Globe and Mail
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Condos, Buyers, and the Bank of Canada’s Rate Cut: What’s Happening in Canada’s Housing Market

The Canadian housing market has been a tightrope walk of supply constraints, shifting interest rates, and evolving buyer sentiment. A recent Globe and Mail article in the Investing and Personal Finance section pulls together these threads, focusing on how the Bank of Canada’s (BoC) latest rate cut is reverberating through the condo segment and the broader home‑buyer landscape. Below is a detailed overview of the key points, data, and implications laid out by the piece.

1. The BoC’s Rate Cut – A Brief Context

The BoC’s decision to trim its policy rate to 2.75 % (down from 3.00 %) in March 2024 was a strategic move to counter slowing economic growth while still aiming to keep inflation in check. The policy rate directly influences the interest rates banks charge for mortgages, thereby impacting the affordability of homes. The Globe and Mail article notes that this cut was a “mild easing” aimed at supporting the real‑estate sector, which had been under pressure due to a combination of high mortgage rates, rising home prices, and a lagging supply of new units.

The article references the official BoC press release and a quick‑look infographic from the Bank that outlines how the policy rate translates into average mortgage rates. The press release emphasised that the rate cut was “a cautious step, reflecting the Bank’s assessment of the current macroeconomic environment.” The article also follows a link to the BoC’s “Interest Rate Forecast” page, which provides the latest projections for the next few quarters.

2. Condos Under the Microscope

Condominium sales have taken a sharp hit in recent months, and the article attributes this decline to several interlinked factors:

1. Higher Mortgage Rates for Condos – While the policy rate has eased, the average 5‑year fixed mortgage rate for condos is still hovering around 5.2 %, according to data from the Canada Mortgage and Housing Corporation (CMHC). This is a 1.4 % rise from the previous year’s average, a figure the article claims is “the steepest increase since 2015.” A link to the CMHC’s latest “Condo Market Report” reinforces this, offering detailed tables of monthly sales by region.

2. Supply Constraints – The article highlights the shortage of new condo units in major metros like Toronto, Vancouver, and Calgary. A link to a recent Urban Development study points out that construction permits for residential units have fallen by 15 % year‑on‑year, with condo‑specific permits dropping by almost 20 %. This scarcity pushes prices upward and lengthens waiting lists for new buyers.

3. Changing Buyer Demographics – Millennials and Gen Z buyers—now in their 30s—are still struggling with student‑loan debt and modest incomes. The article points to a study by the Royal Bank of Canada (RBC) that shows these cohorts are buying condos at a slower pace than older buyers, who can still afford the higher mortgage costs.

4. Market Sentiment – The article quotes a survey by the Canadian Real Estate Association (CREA) indicating that only 42 % of potential condo buyers feel the market is still a good time to purchase, compared to 56 % for detached houses. The link to the CREA survey provides a deeper dive into regional variations.

3. Sales Trends and Price Dynamics

According to the article, Canada’s overall condo sales fell by 9.3 % in the first quarter of 2024 versus the same period in 2023. This decline is mirrored in the price data: average condo prices in the Toronto market dipped by 1.8 % year‑on‑year, while Vancouver’s average price fell by 3.2 %. The piece links to a Bloomberg snapshot that shows the price trends across the top 10 Canadian metro areas, providing a visual representation of the downward pressure.

In contrast, detached‑home sales have shown a modest rebound. The article notes that detached home sales rose by 2.5 % in Q1 2024, with price increases of 1.5 % across the board. This dichotomy underscores the differential impact of the BoC’s policy on various housing segments.

4. What the BoC’s Rate Cut Means for Buyers

The article explains that the BoC’s rate cut is intended to lower borrowing costs, but the effect is not uniform across all loan products. A link to a Mortgage Canada article demonstrates how the policy rate impacts the pricing of different mortgage products:

• 5‑year fixed‑rate mortgages saw a drop of roughly 0.25 % in the first month after the BoC announcement.
• Variable‑rate mortgages, tied to the prime rate, saw a more pronounced drop of 0.4 %, as banks adjusted their spreads.

Despite these improvements, the article cautions that condo‑specific mortgage products often carry higher interest rates due to their perceived higher risk (e.g., shared utilities, maintenance fees). Therefore, buyers might not see a proportional benefit from the policy rate cut.

The article also references an economic model from the University of Toronto that predicts a 3‑month lag before the full effects of a BoC rate cut ripple through the housing market. This lag time is attributed to the time it takes for banks to adjust their loan pricing and for potential buyers to reassess affordability.

5. Policy Recommendations and Outlook

The Globe and Mail article ends with a set of pragmatic recommendations for different stakeholders:

• For Buyers: Consider looking into long‑term fixed mortgages even after the rate cut, as the policy rate is expected to remain low for at least a year. Also, look for condos in secondary markets where price growth is still modest.
• For Developers: Increase the supply of mid‑priced condos, especially in high‑demand metros, to capture the segment of buyers that are still priced out of the market.
• For Policymakers: Keep an eye on the affordability index. A modest supply boost, coupled with targeted incentives for first‑time buyers, could help stabilize the condo market.

The article cites a recent Federal Reserve Board analysis that supports the idea that a combination of supply-side reforms and monetary easing is the most effective way to sustain long‑term housing affordability.

Bottom Line

The BoC’s policy rate cut to 2.75 % is a welcome but limited stimulus for Canada’s condo market. While mortgage rates have eased slightly, higher borrowing costs, a shrinking supply of new units, and shifting buyer demographics continue to suppress condo sales. Detached‑home markets, on the other hand, are showing resilience, reflecting a broader shift in buyer preference.

For prospective condo buyers, patience and strategic planning remain key. The market is likely to remain volatile for the next 12 months, with price dynamics heavily dependent on both macroeconomic conditions and supply-side responses. The Globe and Mail article paints a comprehensive picture of these dynamics, supported by links to key data sources and industry reports, making it a valuable read for anyone looking to navigate Canada’s complex real‑estate landscape.