As the fall season approaches with the promise of colder weather, it appears most major Canadian housing markets are cooling off ahead of schedule.
Thanks in part to the Bank of Canada’s interest rate hikes this summer, the Canadian market has simmered down after rebounding during the spring. According to RBC, more sellers have decided to enter the market in recent months after stepping back earlier this year, and local real estate boards show market conditions starting to ease in historically hot areas such as Vancouver, the Fraser Valley, Toronto and Hamilton. Edmonton and Calgary also experienced some moderation, albeit to a lesser extent.
This trend towards an overall rebalancing is underscored by growing evidence that price surges are losing momentum in Ontario and British Columbia – typically the most expensive and competitive provinces in the country.
Despite all signs pointing to a rebalancing market, RBC expects the fall season to play out similarly to August – with most buyers remaining on the defensive despite having more homes to choose from. High interest rates, rising costs of living and a looming recession continue to be a challenge for many Canadians, leaving most potential buyers reluctant or unable to purchase. Any substantial acceleration in the housing market’s recovery will likely have to wait until interest rates decrease in 2024.
Here’s a closer look at what happened in key local markets during August:
Greater Toronto Area
In August, home resales in the GTA fell by an additional 1.0 per cent on a seasonally adjusted basis – reversing the spring rebound by about two-thirds. RBC attributes the slowdown to buyer sentiment rather than a lack of available properties.
New listings and inventories rose noticeably over the last five months, including during August. However, buyers appear wary to take the leap while facing high interest rates, poor affordability and a softening economy.
Despite the challenges, demand-supply conditions have swiftly rebalanced, with sales-to-new-listings ratios now nearing buyers’ market territory. The shift is beginning to weigh on prices, which declined by a meagre 0.1 percent – though it’s worth noting that’s the first recorded overall price decline in the GTA since February.
RBC expects prices to remain relatively stagnant for the time being.
Montreal
In Montreal, a growing supply of available homes boosted transaction flows. New listings increased for the fourth time in the last five months during August – up more than 10 per cent according to RBC’s estimate. Home resales exceeded last year’s levels by 3.8 per cent.
Despite more sellers entering the Montreal market, demand-supply remains tight, leaving modest but uneven support for property values. In August, the median price for a single-detached home increased by 1.1 per cent compared to July, while condo apartment prices fell by 0.5 per cent. Properties located on the Island of Montreal generally recorded larger appreciation compared to Laval and the North and South Shores.
Vancouver
Buyer caution seems to have dampened the activity seen in Vancouver this spring. Buyers, for the most part, pulled back during the summer after back-to-back rate hikes – especially during August. RBC estimates that resales fell more than 6 per cent on a month-over-month seasonally adjusted basis.
Despite a growing number of homes being added to the market since April, demand hasn’t been spurred. Homes listed for sale reached a 15-month high in August, but buyer sentiment remained strongly apprehensive, thus balancing the market and allowing prices to slip.
Vancouver’s aggregate MLS HPI fell slightly between July and August, marking the first decline since March. RBC expects buyer sentiment to remain relatively unchanged through the fall season, likely keeping prices on a flat trajectory for the foreseeable future.
Calgary
While many other key markets saw prices begin to slip and buyers take a step back, Calgary remains hotter than ever.
RBC estimates that home resales in August increased by another 10 per cent on a seasonally adjusted basis. While growing supply has contributed to these gains, it has done little to alleviate market tightness as skyrocketing demand continues to outpace housing availability.
Property values in Calgary maintained strong upward momentum as a result. By the end of August the aggregate MLS HPI rose another 1.0 per cent month-over-month, marking a 7.9 per cent increase on an annual basis – the largest advance among major markets in Canada.
For the time being, RBC expects explosive population growth to continue causing competition in the Calgary market.
To read the full report, visit thoughtleadership.rbc.com.
