Sellers in various Canadian cities are back in action, with local real estate boards reporting a material rise in new listings in May, according to RBC Economics & Thought Leadership.
While the additional inventory is welcomed by buyers competing over what little housing stock is available, there is still considerable ground to cover in the gap between supply and demand. In their report, RBC indicates it will take several months of consistent momentum from the supply side to prop up a balanced market, which is a common theme in markets across the country.
In recent months, moderation in housing prices thanks to successive interest rate hikes opened a window of opportunity for buyers, but had the opposite impact on sellers, content to wait for market recovery before listing.
Competition among buyers is pushing housing prices upwards, substantially in some cities, such as Toronto, where the rate of gains is skirting levels seen in the frenetic pandemic market.
In Toronto, there was a marked rise in new listings in May, up by 17 percent month-over-month on a seasonally adjusted basis, as GTA sellers fed into pent-up demand. Despite the flow of new inventory, tight market conditions remain and the GTA’s MLS HPI built upon gains from the month prior, up another 3.2 percent, reflecting the trendline seen during the pandemic.
Vancouver experienced the biggest month-over-month increase in new listings since January, up by 15 percent. Much like Toronto, despite the rise in inventory levels, supply still falls short of demand, pushing prices up. However, RBC expects that the relative affordability of high housing prices will slow the rate of price appreciation in Vancouver.
The market in Calgary remains tight, even with a 27 percent month-over-month surge in new listings, on the heels of decades-low inventory levels. In response, Calgary’s MLS HPI rose by 1.0 percent, a trend that is projected to be sustained as demand is increasing.
Meanwhile the Montreal resale market jumped in May, with an increase of 22 percent, marking the biggest jump in two years. New inventory lagged the uptick in demand, pushing prices up for the fourth month in a row. Median prices rose across housing types, led by condominiums.
According to RBC, higher housing prices should play a key role in pulling the market towards balanced territory, by drawing sellers back to market, and lowering the temperature in bidding wars among buyers, already challenged by affordability.
Although it is important to note that as long as supply lags demand substantially, the risk of swift and potentially unsustainable price appreciation persists.
