BENGALURU (Reuters) - Home prices in Canada will barely rise in 2024 and only modestly in coming years despite expectations for many more interest rate cuts, with affordability improving but remaining stretched, according to analysts polled by Reuters.

After surging nearly 55% during the COVID pandemic, average prices in Canada's interest rate-sensitive housing market have declined only 14% from an early 2022 peak despite 475 basis points worth of Bank of Canada rate rises through July 2023.

Housing affordability is at around its worst since 1990, according to the BoC's own index. Two 25-bps rate reductions since June, and expectations for another on Wednesday followed by several more later this year and into 2025, have done little to spur demand despite some signs of improving supply.

Average Canadian home prices, which are down 1% this year so far, will rise around 1% in calendar year 2024, according to the Aug. 19-Sept. 2 poll of 14 analysts. If realised, that would lag overall inflation, expected to be 2.5% this year.

Home prices are forecast to climb a median 2.8% and 3.0% in 2025 and 2026, respectively - broadly unchanged from a May poll.

"Interest rate cuts have so far failed to stimulate the housing market, although the sharper drop in borrowing costs ... will lend more support," said Olivia Cross, a North America economist at Capital Economics.

"Even after the latest drop in borrowing costs, affordability is far more stretched than prior to the pandemic ... Accordingly, we expect price gains to be modest."

Improving supply alongside anaemic demand could put downward pressure on prices over the coming years.

While housing starts jumped 16% in July on a monthly basis, according to the Canada Mortgage and Housing Corporation (CMHC), and new listings rose nearly 1%, home sales fell 0.7%, Canadian Real Estate Association data showed.

More supply could come as many Canadians, at risk of sharp rises in borrowing costs over the coming years due to mortgage renewals, are expected to list their properties for sale. Roughly C$300 billion ($222.4 billion) of mortgages will come up for renewal next year.

In Canada, mortgages are typically for 25 years and renewed every three or five years, unlike the U.S. where homeowners can enjoy a flat rate for a 15-year or 30-year mortgage.

All 10 analysts but one said purchasing affordability for first-time homebuyers would improve over the coming year. But the question remains on how significant this will be.

"More interest rate cuts are likely to stimulate homebuyer demand across the country. But, we expect this will be gradual," said Rachel Battaglia, an economist at RBC.

"Significant reductions in rates will be needed to make a noticeable difference in ownership costs, especially in Canada's priciest markets."

Persistently high house prices could apply further pressure on rental markets, which may keep rents rising faster than home prices over coming years, according to some respondents.

(Other stories from the Q3 global Reuters housing poll)

($1 = 1.3488 Canadian dollars)

(Reporting and polling by Indradip Ghosh; Additional reporting by Mumal Rathore; Editing by Ross Finley and Mark Heinrich)