The Chambre immobilière de l’Outaouais recently released statistics for September 2024, revealing notable growth in Gatineau’s residential real estate market. With an increase in sales and active listings, this market continues to show strength despite signals of slowdown, such as a drop in new listings and longer sales times. However, one key factor deserves further analysis: the limited impact of the key interest rate cut on the real estate market, and the hope that the possibility of a further 50 basis point reduction may change things.
Sales growth and active listings: Dynamism on the surface
In September 2024, Gatineau’s residential real estate market recorded a 15% increase in sales, with 360 transactions compared to 312 for the same period in 2023. In addition, active listings increased by 19%, from 1,331 to 1,587. These figures indicate an active market, where properties continue to sell despite global economic challenges.
However, another figure draws attention: new listings decreased by 5%, from 641 to 612. This drop in new listings is worrying, as it could indicate a reduction in future supply on the market. In a context where it was expected that the cut in the policy rate would stimulate not only demand but also supply, this decline shows that the impact of this monetary policy is not as strong as expected.
Diminished impact of the key rate cut
The Bank of Canada lowered its key lending rate in 2024, hoping to stimulate the economy by facilitating access to mortgages. Theoretically, lower interest rates should encourage buyers to enter the market and sellers to put their properties up for sale. However, in the case of Gatineau, the results observed suggest that this impact was more moderate than expected.
Why didn’t this reduction have the expected effect?
- Persistent economic uncertainties: Even though mortgage rates have fallen, buyers remain cautious due to economic uncertainty. They are more hesitant to commit to major transactions, which is reflected in longer sales times. In September 2024, single-family homes took an average of 47 days to sell, compared with 36 days in September 2023. This gap shows that, despite lower borrowing costs, buyers are taking longer to finalize their purchases.
- More restrictive access to credit: Although interest rates have fallen, some financial institutions have tightened their lending criteria. This means that even though loans are more affordable, fewer people have access to them. This limits the potential effect of lower rates on increased demand.
- Restricted supply: The drop in new listings suggests that many sellers are reluctant to put their properties on the market. This could be due to uncertainties about the ability to obtain competitive offers, or fears that prices will stagnate or fall due to uncertain economic conditions.
Towards a 50 basis point reduction: a potential turning point?
Faced with this situation, some real estate market experts are considering the possibility of a further 50 basis point cut by the Bank of Canada to strengthen the economy. This deeper cut could have a more visible impact on the Gatineau real estate market. But what could really change with this additional cut?
- Increased stimulus to demand: A further drop in rates would make borrowing even more affordable for buyers. This could not only attract more first-time buyers, but also encourage investors to enter or re-enter the market, stimulating demand in a more significant way.
- Sellers’ reaction: If demand increases sufficiently, sellers who have been reluctant to enter the market may be encouraged to do so, fearing they will miss a favorable window of opportunity to sell at attractive prices. This could mitigate the decline in new listings observed in September 2024.
- Shorter selling times: With lower rates and potentially stronger demand, selling times could decrease, as buyers would be more inclined to make quick decisions to take advantage of favorable conditions. This would help to absorb the current supply and make the market more fluid.
Conclusion: a market waiting for a change of direction
Gatineau’s real estate market, while growing, is showing signs of caution and an underlying slowdown. The reduction in the key interest rate in 2024 had a limited effect on real estate activity, neither stimulating demand nor supply as much as expected. However, the possibility of a further 50 basis point cut could be just the boost needed to rebalance the market.
The coming months will be crucial in assessing the real impact of monetary policy on the real estate market. If rates fall further, it could lead to a more pronounced increase in demand, reducing selling times and encouraging more sellers to put their properties on the market. In such a scenario, Gatineau could see its real estate market intensify, offering opportunities to both buyers and sellers.
In the meantime, market players must remain vigilant and flexible, ready to adjust their strategies according to future changes in the key interest rate and the dynamics of supply and demand.