Early signs are indicating that more home sellers are jumping into Canada’s housing market, welcome news for buyers who have been facing persistent supply shortages.
A newly-published RBC Thought Leadership report by senior economist Robert Hogue says that while one month doesn’t necessarily make a trend, February’s market stats are signalling that more home sellers may be entering the market.
Early results from real estate boards across the country have shown month-to-month increases in new listings, particularly in Calgary and Edmonton which had the strongest number of transactions ever recorded in the month of February.
Purchasers are still facing a lack of home supply, a factor that continues to drive prices upward, especially in areas like the Fraser Valley, Toronto and Vancouver where values have continued to rise.
“Sellers will play a central role in shaping up this year’s spring season,” said Hogue.
“Should a critical mass of current homeowners see the coming months as an opportune window to list their property—now that interest rates are on the rise and ahead of potential policy actions targeting speculators—it would ease some of the supply restraints, both boosting near-term activity and reducing some of the pressure of prices,” he added.
Hogue mentioned that should the quantity of home sellers fail to increase, recent price trends are “likely to persist,” until significant interest rate hikes curb demand.
Toronto prices on the up as Vancouver sees more balanced conditions
Home prices in the Toronto region rocketed upwards last month while Vancouver’s market leveled out slightly.
In February, the composite MLS Home Price Index (HPI) for Toronto rose 6.4 per cent from January, more than $80,000 in a single month. This follows a $52,000 increase in January, pushing the index up 35.9 per cent since February 2021. Toronto’s benchmark price of $1.34 million is the highest nationally.
“Despite crushingly poor affordability, demand remains exceptionally brisk at this stage,” said Hogue. “Buyers pounced on a larger offering of homes for sale in February, causing resales to climb 5.9 per cent from January (on a seasonally-adjusted basis).”
This marks the second-busiest February on record, but rising rates are anticipated to cool demand over time — high prices and a large presence of investors “make the market especially sensitive to rising interest rates.”
Over on the west coast, market activity slowed as more listings came online.
By RBC estimates, Vancouver area resales were down six per cent while new listings climbed 12 per cent from January. These patterns could signal a “welcome first step,” towards more balanced market conditions across the Vancouver region, Hogue pointed out, but noted that high demand and low inventory would “keep the heat,” on property values. Last month, Vancouver’s composite MLS HPI shot up 4.6 per cent monthly to $1.31 million, more than $58,000. In a year, values have increased $226,000, or 20.8 per cent.
“Buyers clearly face an extremely challenging situation. Higher interest rates will make things even more difficult for many, further crushing affordability in the period ahead,” said Hogue. “We expect this will gradually suppress demand later this year and contribute to the market rebalancing.”
Calgary reports record February amid gain in sales and listings
Calgary made a mark in February’s market.
Resales grew 19 per cent monthly with 3,300 transactions, the strongest ever for a February in Calgary. This follows a round of month-to-month sales increases that ranged from nine to 15 per cent. A rush in new listings helped to bolster sales, which were up 69 per cent from January.
“It provided many buyers the options they had been seeking for some time amid shrinking inventories. These new buying opportunities came at a steeper price though,” said Hogue, who noted that Calgary’s composite MLS HPI grew 5.9 per cent — about $27,000 — between January and February.
