Momentum gained in the national housing market earlier this year is continuing in some local markets, but stalling in others, on the heels of an interest rate hike in June, according to a new report from RBC economics.
In Toronto, Hamilton, Ottawa and Vancouver, buyer sentiment was subdued after June’s rate hike increased borrowing costs, but buyers in Calgary, Fraser Valley, Edmonton and Montreal were largely unphased by the rate increase, with activity remaining robust, according to local real estate boards.
Rapidly rising prices in some cities, such as Vancouver, Toronto and Ottawa may have pushed would-be buyers to the sidelines yet again, while relative affordability in housing prices in Calgary and Edmonton, makes it easier for house hunters to absorb a rise in borrowing costs.
Fuelling the price gains earlier this year is an ongoing mismatch between supply and demand, with sellers reluctant to list, and buyers returning in larger numbers. According to RBC, the price pressure should diminish as more listings are coming to market.
They report that across all local markets, listings increased last month, building on broad-based gains seen in May, which is good news for house hunters whose budgets are being challenged by a double hit of rising housing prices and rising borrowing costs.
The speed of the market rebound was surprising, especially in Toronto, according to RBC, expecting it to take considerably longer for the market to absorb the rate hikes.
However, the most recent data shows that this fast-forward momentum lost steam last month, with an additional, unexpected rate hike being the culprit.
In Toronto, sales activity rose sharply in the traditionally busy spring market, up a staggering 32 percent in April and May. In June, however, sales activity slid by 6.9 percent, month-over-month.
House prices continue to creep up in Toronto, with MLS HPI composite benchmark price up 2.5 percent to $1.16 million in June. This is up almost 9 percent from the trough of the market in February of this year, reversing much of the decline experienced as the market cooled.
In Vancouver, the market moved to more balanced territory, as more sellers came to market in June, with listings rising for the third month in a row. After months of successive increases, transaction numbers were little changed in June, suggesting that recent price appreciation, along with an interest rate increase caused buyers to pause.
Meanwhile, housing sales were up by 11 percent in Montreal in June, continuing the upward trend, where housing sales were up by 3.9 percent in April and 8.1 percent in May. New listings were steady in Montreal, boosting the sales activity.
In Calgary, more supply was quickly snapped up by motivated buyers in the region. An increase of 9 percent in sales in June builds on the 6.0 percent seen in May. Calgary continues to be a much sought- after market because of the relative affordability of housing prices, compared to other big cities.
