BMO Housing market calming Housing sales in Canada have returned to more normal levels in response to tougher mortgage rules and cooling credit, says a new seven-page report from BMO Economics.

The report, by senior BMO economist Sal Guatieri, says the Canadian housing market is “calming not crashing.”

“House prices have hit record highs in most regions across Canada, though the rate of appreciation has slowed,” said Guatieri.

“Resale markets are largely balanced, though buyers have gained leverage in some provinces, including Quebec and British Columbia. Steadier prices are expected in the year ahead amid decent job growth. A benign outlook for rates and income should support affordability this year, weighing towards relatively steady sales and prices in most regions,” he continued.

But, as always, things vary a great deal from province to province and city to city. Here are the notable findings from the report:


  • In most regions, sales have fallen at double-digit rates this year from high levels last year. But the rate of decline has slowed recently, supported by decent affordability in many regions
  • Nationwide, sales are expected to stabilize this year amid steady job growth
  • In BC, poor affordability has undercut demand for detached homes, while the suspension of the Immigrant Investor Program has reduced the available supply of wealthy foreign buyers
  • Alberta is enjoying decent sales growth, while demand has picked up in Saskatchewan
  • In Toronto, new condo sales plunged 55% in the first three months of this year from high levels a year ago, and resale activity has also weakened
  • Condos

    account for one-in-five resales in the Greater 

    Toronto Area, little changed in the past year


  • Nationwide, homebuilding has slowed in an orderly manner, and is now in line with household formation. It is expected to moderate somewhat further in the year ahead, applying a modest brake to the economy
  • A pullback in residential construction is widespread across regions, led by builders in Toronto and Montreal
  • The supply of unsold condos is particularly elevated in Winnipeg and Toronto, and, to a lesser extent, in Vancouver
  • In Toronto, a more abundant supply of condos mirrors a dearth of available detached properties, as zoning restrictions have reduced land supply
  • Total new high-rise and low-rise inventory in Toronto is moderately above long-term norms, though well below the 2008 peak
  • The Toronto condo market has effectively replaced traditional apartments, and remains an affordable option for those priced-out of the tight detached market
  • About 23% of Toronto condos are used as rentals

Resale Market Balance

  • Comparing sales and listings, markets are balanced in most of the country
  • Active listings are high in Quebec, New Brunswick and Nova Scotia, all with 12 or more months’ supply relative to sales
  • New listings have shot up in Ottawa and Montreal, pushing their sales ratio into buyers’ market territory
  • Vancouver also leans toward buyers, despite a recent drop in listings
  • Apartment rental and condo vacancy rates remain very low in Toronto and Vancouver, suggesting strong underlying demand for accommodation. As a result, rents have picked up in those two cities


  • Nationwide, resale prices hit record highs in April, though the rate of appreciation has slowed to 2.2% year-over-year from above 5% a year ago
  • Calgary’s resale prices are up 7% year-over-year, supported by good valuations and strong job growth. The upward trend should continue, as Alberta is expected to lead the nation’s economic performance in 2014
  • Vancouver remains the weakest major market in Canada because of poor affordability, with resale prices down 5% from last spring. Though prices have turned up recently, high valuations point to renewed softness ahead
  • Though slowing, Toronto home prices hit record highs in April, with gains in the tight detached market more than offsetting a slight decline in condo values. Prices are expected to soften this year due to elevated valuations in the detached market and excess supply in the condo segment

Valuations and Affordability

  • In most regions, valuations are only moderately elevated, with prices generally no higher than four-times income
  • However, valuations are very high and affordability is strained in Vancouver’s and Toronto’s detached market (if measured against median income and excluding wealth), though condos remain affordable
  • Prices are likely to decline moderately in both Vancouver and Toronto as interest rates rise gradually in the coming years
  • While lower prices have improved Vancouver’s valuations, a further orderly decline is likely required to temper the risk of a larger correction

To read the report in its entirety, click here.

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