The Bank of Canada today held its target for the overnight rate at 5%, with the Bank Rate at 5¼% and the deposit rate at 5%. The Bank is continuing its policy of quantitative tightening.

Global economic growth slowed in the fourth quarter. US GDP growth also slowed but remained surprisingly robust and broad-based, with solid contributions from consumption and exports. Euro area economic growth was flat at the end of the year after contracting in the third quarter. Inflation in the United States and the euro area continued to ease. Bond yields have increased since January while corporate credit spreads have narrowed. Equity markets have risen sharply. Global oil prices are slightly higher than what was assumed in the January Monetary Policy Report (MPR).

In Canada, the economy grew in the fourth quarter by more than expected, although the pace remained weak and below potential. Real GDP expanded by 1% after contracting 0.5% in the third quarter. Consumption was up a modest 1%, and final domestic demand contracted with a large decline in business investment. A strong increase in exports boosted growth. Employment continues to grow more slowly than the population, and there are now some signs that wage pressures may be easing. Overall, the data point to an economy in modest excess supply.

CPI inflation eased to 2.9% in January, as goods price inflation moderated further. Shelter price inflation remains elevated and is the biggest contributor to inflation. Underlying inflationary pressures persist: year-over-year and three-month measures of core inflation are in the 3% to 3.5% range, and the share of CPI components growing above 3% declined but is still above the historical average. The Bank continues to expect inflation to remain close to 3% during the first half of this year before gradually easing.

Governing Council decided to hold the policy rate at 5% and to continue to normalize the Bank’s balance sheet. The Council is still concerned about risks to the outlook for inflation, particularly the persistence in underlying inflation. Governing Council wants to see further and sustained easing in core inflation and continues to focus on the balance between demand and supply in the economy, inflation expectations, wage growth, and corporate pricing behaviour. The Bank remains resolute in its commitment to restoring price stability for Canadians.

Information note

The next scheduled date for announcing the overnight rate target is April 10, 2024. The Bank will publish its next full outlook for the economy and inflation, including risks to the projection, in the MPR at the same time.

Courtesy of the Bank of Canada

FEBRUARY 2024 HOUSING MARKET UPDATE

March 1, 2024

Low inventory and high demand drive price gains in February

New listings continued to rise in February, reaching 2,711 units. However, the rise in new listings supported further growth in sales, which increased by nearly 23 per cent compared to last year for a total of 2,135 units. The shift in sales and new listings kept the sales-to-new listings ratio exceptionally high at 79 per cent, ensuring inventories remained near historic lows. Low supply and higher sales caused the months of supply to fall to just over one month, nearly as tight as levels seen during the spring of last year.

“Purchasers are acting quickly when new supply comes onto the market, preventing inventory growth in the market," said Ann-Marie Lurie, Chief Economist at CREB®. “It is this strong demand and low supply that continues to drive price gains in Calgary. The biggest supply challenge is for homes priced under $500,000, which saw inventories fall by 31 per cent compared to last February. At the same time, we are starting to see supply levels rise for higher priced homes supporting more balanced conditions in the upper end.”

In February, the unadjusted detached benchmark price was $585,000, an over two per cent gain compared to last month and over 10 per cent higher than levels reported at this time last year. Our most affordable East district is experiencing the highest year-over-year price growth at 25 per cent, while the relatively better-supplied City Centre has reported the slowest price growth in the city at under five per cent.

Detached

In February, 1,195 new listings came onto the market, of which 75 per cent were priced over $600,000. While new listings did improve over last month in line with seasonal expectations, levels are still below typical levels for February. At the same time, sales in February rose to 954 units, a year-over-year gain of 20 per cent. The growth in sales was driven by where we saw listings growth, but with a sales-to-new listings ratio of nearly 80 per cent, inventory levels were near record lows for February.

Exceptionally tight market conditions drove further price growth. In February, the unadjusted detached benchmark price rose to $721,300, nearly three per cent higher than last month and over 13 per cent higher than last February. While prices rose across every district, the most significant year-over-year gains occurred in the North East and East districts.

Semi-Detached

Last month’s rise in listings compared to sales was short-lived, as the 223 new listings this month were met with 191 sales, driving up the sales-to-new-listings ratio to 86 per cent. This prevented any significant change to the low inventory situation and caused the months of supply to fall to just over one month.

In February, the unadjusted benchmark price reached $639,100, a monthly gain of over two per cent and 13 per cent higher than last year. Year-over-year price gains ranged from a low of 10 per cent in the City Centre to over 26 per cent in the East district.

Row

New listings rose to 457 units in February, contributing to the year-to-date increase in new listings of 22 per cent. The rise in new listings supported sales growth, preventing any significant change to the low inventory situation. For the second consecutive month, the months of supply were below one month.

The exceptionally tight market conditions have contributed to strong price growth for row properties. In February, the unadjusted detached price reached $436,500, over 2 per cent higher than last month and nearly 19 per cent higher than levels reported last February. Prices rose across all districts, with the highest growth occurring in the most affordable districts.

Apartment Condominium

Sales in February reached 638 units, contributing to the year-to-date sales increase of 39 per cent. Relative affordability has supported the strong demand for apartment-style homes, and sales growth has been possible thanks to the continued growth in new listings. Inventory levels trended up over the last month in line with seasonal expectations. However, inventory levels declined by 12 per cent compared to last year, ensuring the market continued to favour the seller with just over one month of supply.

Persistently tight conditions continued to place upward pressure on home prices. Prices have steadily increased since January of last year, and as of February, they reached $329,600, a 17 per cent gain over last February. Prices rose across every district in the city, with year-over-year gains surpassing 19 per cent in all districts except the City Centre, which reported a year-over-year gain of 13 per cent.

REGIONAL MARKET FACTS

Airdrie

New listings in Airdrie improved in February. However, with 182 new listings and 135 sales, the sales-to-new listings ratio remained high, and inventory levels eased over last year's low levels. Inventory levels are half what we typically see in February and have not been this low since 2006.

The rise in sales compared to inventory levels caused the months of supply to drop to just over one month. Airdrie has struggled with limited supply over the past several years, driving home prices. In February, the unadjusted benchmark price reached $529,700, over one percent higher than last month and 10 per cent higher than the $479,700 price reported last February.

Cochrane

New listings rose to 105 units in February, the highest monthly total seen since July last year and contributing to the year-to-date gain of 22 per cent. At the same time, February sales improved over last year, with 65 sales.

With a sales-to-new listings ratio of 62 per cent, we did see some growth in inventory levels compared to last year. However, inventories remain well below what is typical for this market. Nonetheless, the months of supply remained relatively low for this market at two months, supporting further price growth in the town. As of February, the unadjusted benchmark price reached $548,300, an improvement over last month and over 11 per cent higher than levels reported last year.

Okotoks

For the second month in a row, new listings improved in Okotoks compared to last year. However, as sales also improved over the past two months, inventory levels in February remained stable compared to last month and only slightly higher than last year’s levels.  Inventory levels are near record lows for the month and are 63 per cent below long-term trends.

Okotoks has struggled to add enough supply to keep pace with demand, keeping conditions tight and driving home prices. As of February, the unadjusted benchmark price reached $605,500, nearly three per cent higher than last month and a 10 per cent gain over last year at this time.

Click here to view the full City of Calgary monthly stats package.

Click here to view the full Calgary region monthly stats package.

JANUARY 2024 HOUSING MARKET UPDATE

February 1, 2024

January sees strong sales fueled by boost in new listings

January sales rose to 1,650 units, a significant gain over last year's levels and long-term trends. The growth was possible thanks to a rise in new listings totalling 2,137 units in January. New listings rose for homes priced above $300,000, but the largest gains occurred for homes priced above $700,000.

The rise in new listings relative to sales did little to change the low inventory situation in the city.  With 2,150 units in inventory, levels are near the January record lows set in 2006 and are nearly 49 per cent below the long-term average for the month.

"Supply challenges have been a persistent problem since last year. This month's gain in new listings has helped provide options to potential purchasers, supporting sales growth. However, the growth in sales prevented any significant adjustments in supply, keeping conditions tight and supporting further price growth," stated Ann-Marie Lurie, Chief Economist at CREB®. 

The months of supply in January was 1.3 months, falling over last month's and last year's levels. The persistent tightness in the market contributed to further upward pressure on home prices. The unadjusted benchmark price in January reached $572,300, a gain over last month and ten per cent higher than levels reported last January.

Detached

A boost in new listings helped support stronger sales this month. However, with a sales-to-new-listings ratio of 77 per cent, there was minimal change in the low inventory situation reported in the detached sector. New listings rose for all homes priced above $500,000, but the largest gains occurred in the over $700,000 market segment. Low inventory levels compared to sales prevented any improvement in the months of supply, which at 1.4 months was lower than levels reported last month and last January. 

The exceptionally tight market conditions continued to drive further price growth. In January, the unadjusted detached price reached $702,200, nearly one per cent higher than last month and nearly 13 per cent higher than prices reported last year. Year-over-year price gains ranged from a low of 10 per cent in the City Centre and South East districts to a 27 per cent gain in the East district of the city.

Semi-Detached

With 223 new listings and 131 sales, the sales-to-new listings ratio fell to 59 per cent, the lowest level reported since 2020 and significantly improved over the 82 per cent average reported in 2023. The sudden shift did cause inventories to improve over the last month, but they remain well below long-term trends.

The unadjusted benchmark price in January was $625,000, slightly lower than last month but over 11 per cent higher than last January. The monthly decline was driven mainly by adjustments in the higher-priced districts of the West and City Centre.

Row

Like other property types, new listings and sales rose in January over levels reported last month and last year. However, with 322 new listings and 297 sales, the sales to new listings ratio remained exceptionally high at 92 per cent. This contributed to further reductions in inventory levels, and the months of supply once again fell below one month.

Limited supply and strong demand contributed to a rise in prices. In January, the unadjusted benchmark price reached $426,400, up over last month and nearly 20 per cent higher than levels reported in January 2023. While year-over-year prices are higher in every district, the West and City Centre districts saw unadjusted benchmark prices ease slightly over December.

Apartment Condominium

Apartment-style properties continued to see the most significant gain in sales activity, rising to 488 sales in January, a year-over-year increase of 54 per cent. This was possible thanks to the growth in new listings. However, the gain in listings did little to supply levels; with 682 units, inventories were 40 per cent below long-term trends.

Tight market conditions continued to contribute to further price gains. In January, the unadjusted benchmark price reached $324,000, nearly one per cent higher than last month and 19 per cent higher than last January. Prices rose across all districts, with the largest year-over-year gains occurring in the most affordable districts of the North East and East. 

REGIONAL MARKET FACTS

Airdrie

Stronger detached and row sales were enough to offset pullbacks in the semi-detached and apartment sectors, causing total residential sales to increase over levels reported last January. This, in part, was possible thanks to a boost in new listings. However, the boost in new listings and sales prevented any significant shift in inventory levels, which was half of the levels typically seen in the market. 

While conditions remained tight, the unadjusted benchmark price remained stable over the last month but was nearly 10 per cent higher than levels reported in January 2023. The most substantial price gains have occurred for apartment-style homes, which are the most affordable property type. 

Cochrane

Eighty-three new listings and 70 sales occurred in January, keeping the sales to new listings relatively high at 84 per cent. This prevented any significant change in inventory levels compared to last month but caused the months of supply to fall below two months once again. The drop in the months of supply is a shift over the last four months, where the months of supply was over two months. 

Despite recent tightening, the unadjusted benchmark price did ease slightly over last month’s levels. Overall, the unadjusted benchmark prices across all property types remained over 10 per cent higher than last January.

Okotoks

Both sales and new listings rose in January compared to last month's and last year’s levels. This caused the sales to new listings ratio to fall to 75 per cent, which was still relatively high but an improvement over the 86 per cent average reported last year. Nonetheless, the sudden gain in new listings was insufficient to cause material changes to the low inventory levels.

With just over one month of supply, conditions remain tight in Okotoks, driving prices up. In January, the benchmark price reached $589,600, higher than last month's and year’s levels. Year-over-year price growth occurred across all property types, with gains ranging from a high of 15 per cent for row properties to a low of six per cent for apartment-style homes.

Click here to view the full City of Calgary monthly stats package.

Click here to view the full Calgary region monthly stats package.

RE/MAX® has been voted the #1 Most Trusted Real Estate Agents in Canada by Canadian shoppers, year after year*, according to the 2024 BrandSpark® Canadian Trust Study.

The study is based on a national survey of 25,161 Canadian shoppers who gave their top-of-mind, unaided feedback on which brands they trust most and why, in the categories, they have recently shopped. Market research and consulting firm BrandSpark International analyzed 262 different categories of consumer products and services, spanning Household & Cleaning, Petcare, Home Goods, Food & Beverage, Beauty & Personal Care, Over-The-Counter Health, Baby & Kids, Automotive, Restaurants & Retail and Services.

As part of the Services category, RE/MAX was named the #1 most trusted real estate agency brand*.

The BrandSpark Canadian Trust Study reveals that, despite the challenges posed by inflation, consumers prioritize product quality and are willing to pay a premium for brands that consistently deliver excellence. Brand names continue to dominate the list, demonstrating that established brands continue to deliver value to Canadians.

“New challengers are appearing in many categories, often online and at much lower price points, but the best brands are proving resilient with Canadian consumers when they focus on delivering and communicating the strengths that made them trusted names in the first place,” said BrandSpark Vice-President of Shopper Insights Phil Scrutton in a press release.

Rising lending rates have had a notable impact on the housing sector, prompting potential buyers to search for more affordable housing options. Simultaneously, some potential sellers have refrained from listing their homes to avoid the consequences of higher rates. The decrease in new listings at lower price points has likely hindered overall sales activity, particularly as lower-priced properties contributed to declines in sales during 2023. Despite a moderation from record-high levels, strong migration growth and a robust labour market have kept sales well above long-term trends. 

While international migration has influenced rental markets, resulting in increased rental gains and heightened demand from investors, interprovincial migration from higher-priced markets in British Columbia and Ontario has helped support sales growth in the higher price ranges of our market, even in the face of higher lending rates. Moving into 2024, we anticipate that potential buyers who were previously on the sidelines due to limited supply choices may reenter the market as lending rates ease and listings improve. 

Looking ahead to 2024, migration is expected to slow, but remain robust enough to sustain relatively strong sales in our market.

At the same time, with more mortgages set to renew, we could see some gains in resale listings as existing homeowners who were previously hesitant to change their housing situation may be motivated to capitalize on rising prices and favourable seller market conditions. The combination of improved listings and heightened activity in the new home sector is anticipated to foster some growth in overall supply. However, given the persistent strong demand driven by recent migration and a healthy job market, it will take time for supply levels to rise sufficiently to restore balance to the market. 

Although conditions are not expected to be as tight as in 2023, a seller’s market is projected to persist throughout the spring market, resulting in further price growth. However, the rate of growth for each property type is anticipated to slow compared to 2023 levels. Supply growth is expected to be mostly driven by the upper price ranges for each property type, which will likely decelerate the pace of price growth for higher-priced properties. Meanwhile, conditions are expected to remain tight for lower-priced properties, contributing to continued price gains.

Courtesy Calgary Real Estate Board.

Click here for the full CREB^® 2024 Forecast Calgary and Region Yearly Outlook Report.

The Canadian real estate market is going through an adjustment period right now. After a couple of years of meteoric growth across the entire housing sector, conditions seem to be settling, the frenzy has come to an end, and Canadian housing markets from coast to coast are regaining equilibrium.

According to the 2024 RE/MAX Canadian Housing Market Outlook, the national average residential price is expected to rise only slightly this year, by 0.5 percent. Meanwhile, 61 percent of markets surveyed in the report are expected to see unit sales increase year over year. This is a complete retreat from the challenging market conditions experienced in early 2022.

So, what is happening exactly? First, the Bank of Canada (BoC) has been raising interest rates, a tightening cycle that has lifted mortgage rates. Second, there has been a great deal of uncertainty in the housing market and the broader economy. Third, many households have exhausted their pandemic-era savings, and inflation has diminished their purchasing power.

Ultimately, the Canadian real estate market is slipping into balanced territory because of the latest developments nationwide. RE/MAX’s outlook for the Canadian housing market suggests 41 percent of regions will return to balance, while 28 percent of markets will likely favour sellers, 21 percent tilted toward buyers, and four percent will experience mixed conditions.

“It’s been a challenging year for Canadian homebuyers and sellers, who have been feeling the effects of a severe housing shortage and the high cost of living, but much like Canada’s housing market, Canadians have stayed resilient. Historically, real estate has given owners excellent returns and strong financial security – and that hasn’t changed,” said Christopher Alexander, President of RE/MAX Canada. “The slower market we experienced across the country in the fall could be an early indicator of an active 2024, as reflected in the modest price increase and sales outlook in 2024, and the balancing of conditions in several regions across the country.”

But while this talk of balancing conditions and steadying prices is good news for prospective homebuyers, what about sellers? Is this type of environment beneficial for those looking to list their home this year?

Why Current Conditions in the Canadian Real Estate Market Could Be Good News for Sellers

So, what exactly is a balanced or buyer’s market anyway?

A balanced market is when the supply of residential properties meets the level of demand. A buyer’s market is when there is a greater inventory of homes than the number of buyers.

Now, it is crucial to understand how these types of climates work:

Buyers will possess more leverage and may be able to negotiate prices. (Much different from years past!)

Your home may sit unsold on the market for longer than you anticipated.

You might need to lower your expectations from your initial asking price.

With prices expected to ease in 2024 and conditions tilting in favour of buyers, where is the good news for sellers?

First, the +0.5-per-cent outlook is a national average, and may be higher or lower depending on where you are located. For example, if you are selling your home in the Edmonton real estate market, the sale price is expected to rise four percent in 2024. Meanwhile, if you are listing your home for sale in the Windsor housing market, average price is expected to rise seven percent this year.

Second, if you are selling your home, you will also need another place to hang your hat once the transaction is completed. Therefore, if you take the equity and purchase another residence, you will not have to endure the frenzy and panic of a seller’s market.

Finally, a balanced market does not mean you will need to give away your home for a 20 percent discount. But you might need to employ a few additional measures to attract buyers. Here are several suggestions:

• Always work with a real estate agent.

• Be sure that your home is in tip-top shape and have your home inspected before a For Sale sign is erected on your front lawn.

• Make your front and backyard presentable; enhance your home’s curb appeal.

• Ensure that you clean your house of clutter.

• Add a couple of incentives, such as new appliances.

Remember, there is still demand for housing. With the Bank of Canada expected to start decreasing interest rates this year, home buying is likely to pick up again, especially as immigration levels rise. Put simply, the competition in the Canadian real estate market will likely be revived.

“Canadians have been understandably hesitant to engage in the market in 2023. Despite this, Canadians still see real estate as a solid long-term investment,” said Alexander.

Courtesy RE/MAX Canada

DECEMBER 2023 HOUSING MARKET UPDATE

January 2, 2024

Strong migration and low supply drive Calgary housing prices in 2023

Sales in 2023 did ease relative to last year's peak, but with 27,416 sales, levels were still far higher than long-term trends and activity reported before the pandemic. While sales stayed relatively strong, there was a notable shift in activity toward more affordable apartment condominiums style homes.

“Higher lending rates dampened housing demand this year, but thanks to strong migration levels, housing demand remained relatively strong, especially for affordable options in our market,” said CREB® Chief Economist Ann-Marie Lurie. “At the same time, supply levels were low compared to the demand throughout the year, resulting in stronger than expected price growth.”

Inventory levels were persistently below long-term trends for the city throughout most of the year, averaging a 44 per cent decline over the 10-year average. We also saw the months of supply remain well below two months throughout most of the year across homes priced below $1,000,000.

The persistently tight conditions contributed to our city's new record high price. While the average annual benchmark price growth did slow from 12 per cent in 2022 to nearly six per cent growth in 2023, the price growth was still relatively strong especially compared to some markets in the country.

Detached

With an annual decline of nearly 20 per cent, the detached market saw the most significant decline in sales activity. While sales did improve for homes priced above $700,000, limited supply choices in the lower price ranges caused consumers to turn to alternative housing styles. Despite some recent gains in higher-priced new listings, inventories have remained near record lows, and the months of supply have remained relatively low throughout 2023.

The persistently tight market conditions have supported further price growth for detached homes, albeit at a slower pace than last year. On average, the benchmark price rose by nearly eight per cent in 2023, with the most significant gains occurring in the city's most affordable districts.

Semi-Detached

Like the detached sector, year-over-year sales growth since May was not enough to offset the pullbacks at the beginning of the year, leaving 2023 sales down by 10 per cent. The decline in sales was driven by pullbacks for homes priced under $500,000, while sales improved for higher-priced properties. The decline in the lower range was primarily due to limited supply choices, preventing stronger sales.

Persistently tight market conditions this year caused prices to trend up throughout most of the year. On an annual basis, the benchmark price rose by seven per cent over last year—a slower gain than the 12 per cent reported in 2022, but still relatively strong. Price growth ranged from a low of six per cent in the city centre to over 16 per cent in the east district.

Row

Limited supply choices in the lower price ranges contributed to the pullback in sales in 2023. Annual sales declined by over 11 per cent despite rising sales for homes priced above $400,000. While new listings did show signs of improving in the second half of the year, all of the gains were reported in the higher price ranges, causing relatively more balanced conditions in the upper price ranges versus the sellers’ market conditions in the lower price ranges.

Conditions favoured the seller throughout the year, supporting an annual benchmark price gain of over 13 per cent. Prices improved across each district, ranging from a low of 11 per cent in the city centre to over 20 per cent price growth in both the North East and East districts.

Apartment Condominium

Apartment-style properties were the only property type to report a gain in sales this year, resulting in a record high of 7,884. The growth in sales was possible thanks to the higher starting point for inventory levels and gains in new listings. However, conditions tightened throughout the year, favouring the seller and driving price growth.

Apartment condominium prices finally recovered from their 2014 high earlier this year and have pushed above those levels, reaching a new record high of $321,400 by December. On an annual basis, the 2023 benchmark price rose by over 13 per cent, a faster pace than the annual growth levels reported last year.  

REGIONAL MARKET FACTS

Airdrie

Primarily due to pullbacks for detached homes, sales in Airdrie declined by 24 per cent over last year's record high. Low inventory levels and a pullback in new listings have somewhat limited sales. While new listings have risen over last year's levels for the past four months, they are still 24 per cent lower than last year. The decline in sales and new listings ensured inventories remained low this year, declining over last year’s and falling to the lowest annual average levels seen since 2006.

For the third year in a row, conditions in Airdrie have generally favoured the seller. This has driven further price gains this year, albeit at a slower pace. On an annual basis, the benchmark price rose by nearly five per cent. This year, the price growth for row and apartment-style properties has been more than double that reported in the detached and semi-detached sectors.

Cochrane

Both sales and new listings in Cochrane fell over last year’s levels. However, recent gains in new listings relative to sales did help support some inventory gains. While inventory levels have improved over the low levels reported last year, they remain over 40 per cent below what we traditionally see in the market.

The recent shifts in new listings relative to sales have helped the months of supply stay above two months since September. However, conditions are still relatively tight, and prices continue to rise. While the growth was stronger in the higher-density sectors of the market, the detached benchmark prices increased by four per cent in 2023 over last year.

Okotoks

Supply has been a challenge in Okotoks, impacting sales and prices. While we have seen some improvements lately regarding the level of new listings compared to sales, inventories have remained near record lows and averaged 63 per cent below long-term trends on an annual basis.

Conditions have remained relatively tight throughout most of the year, especially throughout the busier spring season. Despite some monthly variation, prices generally trended up this year and, on an annual basis, rose by over six per cent.

Click here to view the full City of Calgary monthly stats package.

Click here to view the full Calgary region monthly stats package.

Lawmakers across Canada have put a renewed focus on making housing more affordable, but experts predict chronic issues around pricing and supply will keep straining the country’s rental market in 2024.

“I don't see things getting better in the short term,” Steve Pomeroy, senior research fellow for the Centre for Urban Research and Education at Carleton University, told BNNBloomberg.ca in an interview.

Pomeroy expects a recent uptick in rental construction will partially alleviate the supply shortage in Canada, but he said it will take some time for renters to see meaningful relief.

“We've actually significantly increased our game in terms of adding new rental supply,” Pomeroy said, noting that the pace of rental construction has picked up in Canada in recent years.

“But it's a lag issue,” he continued. “It's going to take a bunch of years … to catch up, and if we don't suppress demand in the short term, we're going to continue to have short-term pressures.”

‘A SLOWER YEAR FOR RENT INCREASES’

Shaun Hildebrand, president of real estate consulting firm Urbanation, told BNNBloomberg.ca that rent prices in Canada will likely remain elevated next year, but he expects price growth to be slower.

“It'll be a slower year for rent increases, particularly in the more expensive markets,” he said in an interview.

Urbanation’s latest monthly rent report found that the average asking price for a rental unit in Canada was $2,174 in November, relatively flat from the previous month but an 8.4 per cent increase year-over-year.

It also found the annual rate of rent growth in Canada has been slowing, following year-over-year increases of 9.9 per cent in October and 11.1 per cent in September.

Hildebrand noted that average rent prices in Toronto and Vancouver decreased towards the end of 2023, due in part to seasonal demand changes, as rent prices tend to decline in the late fall and winter.

Renters may still take advantage of the cooling trend in the early months of 2024, he said.

“If you are a renter that's looking for a unit in Toronto or perhaps Vancouver, the next few months would be quite favorable to do so, but the structural supply deficit in these markets is still very acute,” he said.

A decline in inflation in 2024 and potential interest rate cuts could take some pressure off rent prices in 2024 as first-time homebuyers move into the ownership market, Hildebrand said. However, he cautioned that home prices will likely remain prohibitive for many Canadians. 

Despite the ongoing challenges faced by Canadian renters, Hildebrand said he expects the record price growth seen in the rental market to “move into the mid-to-lower single digits” at the outset of 2024.

GST REMOVAL

The federal government announced in September that it would waive GST on new rental projects in an effort to encourage new developments.

Ontario, the province with the most renters in the country, followed suit in November, announcing the removal of their portion of the HST on new rental builds.

Developers have welcomed the changes but highlighted more work that must be done to add supply to the market.

Giacomo Ladas with rentals site rentals.ca said the tax measures have made rental construction more economically viable for developers, though many challenges remain.

“It’s a really good first step, but there are still so many hurdles that I've talked to developers about that slow down the construction of these new apartments,” Ladas told BNNBloomberg.ca in a phone interview.

“It could take six or eight months, I was told by some developers, to negotiate what colour to paint the facade of their building … there's so many hurdles for them to actually get something built.”

POPULATION GROWTH

Pomeroy and other experts have made the case that record immigration numbers have contributed to the post-pandemic rental supply shortage that has driven up rent prices in turn.

Canada has seen significant increases in its non-permanent resident population, many of them temporary foreign workers and international students.

“Those are the folks who rent,” Pomeroy said.

“The immigration policy or the lack of management of immigration, particularly temporary immigration, I think was the key driver in excess demand. It's not so much that we had a chronic problem of under supply, we had an instant issue of surging excess demand.”

The federal government has tabled plans to level out the number of new permanent residents to Canada in 2026, and doubled the income requirement for foreign students who wish to study in Canada.

But Pomeroy said that in 2024, he doesn’t see those measures “massively ratcheting back” the number of international students or foreign workers coming to Canada.

“In the absence of very aggressive action on reducing that number, then that pressure is not going to go away,” he said.

Courtesy BNN Bloomberg with files from the Canadian Press.

Should Canada’s banking regulators abandon the mortgage stress test?

In 2016, the Canadian government introduced the mortgage stress test as a vital tool to curb risks associated with mortgage lending, especially when the Canadian real estate market experiences higher prices and lower interest rates. It was also amended in 2021 to require borrowers to prove they can maintain mortgage repayments that are 200 basis points above the contracted rate.

The mortgage stress test maintains two thresholds: a minimum qualifying rate (MQR) and an interest rate that is two percentage points higher than the borrower’s mortgage rate. As a result, today’s homebuyers could be experiencing rates between seven and nine percent.

A chorus of housing and finance arguments argue that it is time to ditch or relax this measure as interest rates have risen to their highest levels since before the global financial crisis. Indeed, when the policy was introduced nearly a decade ago, mortgage rates were nearly half of today’s rates. Since July, the conventional five-year fixed-rate mortgage lending rate has been around six percent.

Therefore, critics contend the Bank of Canada’s (BoC) tightening efforts have achieved some safeguards regulators have aimed to install throughout the nation’s housing sector, making the tool obsolete.

“I am all for building a buffer for people’s financial situation, but the stress test limits the amount people can borrow,” Matt Albinati, a mortgage broker with TMG The Mortgage Group, told Canadian Mortgage Trends. “You look back a year, the stress test was doing a pretty good job. This time—or near in the future—it might be a good time to take a closer look at it.”

But officials have been firm on the matter: no relief on the stress test is coming to the mortgage market.

No Relief on Stress Test Coming

The Office of the Superintendent of Financial Institutions (OSFI) says it will not be changing the mortgage stress or exempting some parties from the protective measure.

In response to the Canadian real estate industry’s wider fears about the possibility of new lending rules, the country’s chief bank regulator effectively shot down any expectation that the stress test is going away. In fact, industry experts make the case that the OSFI ostensibly doubled down on the method.

“When a borrower opts to switch lenders, a new loan is created. We therefore expect that the loan be fully underwritten, including application of the MQR for uninsured mortgages to assess debt affordability,” the OSFI said in an Oct. 16 report. “This is because the new lender must do its own due diligence as it will own the credit risk for an uninsured loan.”

In addition, the OSFI surprised mortgage brokers and lenders with this statement:

“Insured borrowers, however, are exempt from the re-application of the MQR when switching lenders at renewal. This is because the borrower’s credit risk has been transferred for the life of the loan to the mortgage insurer.”

For the most part, the mortgage sector had believed insured borrowers faced stress tests upon renewal if they transitioned to a new lender.

Meanwhile, Canada’s top banking regulator noted that exempting all mortgage renewals from the stress test “could cause lenders to compete for loans that do not meet” its expectations. At the same time, the OSFI conceded that it would assess data of uncompetitive rates for borrowers who cannot switch lenders and would “take action if warranted.”

And instead of dismantling the mortgage stress test, the OSFI is considering adding layers to the protective measure.

Regulators could mandate lenders to add more components to the stress test or insert a qualifying amortization period. This could be achieved by connecting the stress test to debt service metrics to determine the borrowers’ abilities to pay their loans and other expenses.

“We believe there is merit in lenders applying an explicit, qualifying amortization limit, and we will continue to evaluate this proposal,” the OSFI said.

Stress Test ‘Not Perfect’

At the September Scotiabank Financials Summit, OSFI Superintendent Peter Routledge conceded that the mortgage stress test “was not perfect.”

“Perhaps it is better to call it incomplete,” he said at the event. “We seek an integrated set of common-sense protections that work effectively both when interest rates are higher than normal, like today, and when interest rates are lower than normal, like during the COVID years.”

Industry leaders are holding out hope that maybe Routledge will heed the sector’s calls and make the necessary adjustments. Others think that the OSFI will only intensify the stress test, adding to borrowers’ growing costs.

Courtesy RE/MAX Canada

The Bank of Canada today held its target for the overnight rate at 5%, with the Bank Rate at 5¼% and the deposit rate at 5%. The Bank is continuing its policy of quantitative tightening.

The global economy continues to slow and inflation has eased further. In the United States, growth has been stronger than expected, led by robust consumer spending, but is likely to weaken in the months ahead as past policy rate increases work their way through the economy. Growth in the euro area has weakened and, combined with lower energy prices, this has reduced inflationary pressures. Oil prices are about $10-per-barrel lower than was assumed in the October Monetary Policy Report (MPR). Financial conditions have also eased, with long-term interest rates unwinding some of the sharp increases seen earlier in the autumn. The US dollar has weakened against most currencies, including Canada’s.

In Canada, economic growth stalled through the middle quarters of 2023. Real GDP contracted at a rate of 1.1% in the third quarter, following growth of 1.4% in the second quarter. Higher interest rates are clearly restraining spending: consumption growth in the last two quarters was close to zero, and business investment has been volatile but essentially flat over the past year. Exports and inventory adjustment subtracted from GDP growth in the third quarter, while government spending and new home construction provided a boost. The labour market continues to ease: job creation has been slower than labour force growth, job vacancies have declined further, and the unemployment rate has risen modestly. Even so, wages are still rising by 4-5%. Overall, these data and indicators for the fourth quarter suggest the economy is no longer in excess demand.

The slowdown in the economy is reducing inflationary pressures in a broadening range of goods and services prices. Combined with the drop in gasoline prices, this contributed to the easing of CPI inflation to 3.1% in October. However, shelter price inflation has picked up, reflecting faster growth in rent and other housing costs along with the continued contribution from elevated mortgage interest costs. In recent months, the Bank’s preferred measures of core inflation have been around 3½-4%, with the October data coming in towards the lower end of this range.

With further signs that monetary policy is moderating spending and relieving price pressures, Governing Council decided to hold the policy rate at 5% and to continue to normalize the Bank’s balance sheet. Governing Council is still concerned about risks to the outlook for inflation and remains prepared to raise the policy rate further if needed. Governing Council wants to see further and sustained easing in core inflation, and continues to focus on the balance between demand and supply in the economy, inflation expectations, wage growth, and corporate pricing behaviour. The Bank remains resolute in its commitment to restoring price stability for Canadians.

Courtesy the Bank of Canada

NOVEMBER 2023 HOUSING MARKET UPDATE

December 1, 2023

Increased listings, strong sales, and price growth.

New listings in November reached 2,227 units, nearly 40 per cent higher than the exceptionally low levels reported last year at this time. Gains in new listings occurred across most price ranges, but the most significant gains occurred from homes priced over $600,000.

Despite the year-over-year jump in new listings, inventory levels remained low thanks to relatively strong sales. With 1,787 sales in November, the sales to new listings ratio remained high at 80 per cent, and the months of supply remained below two months.

“Like other large cities, new listings have been increasing,” said CREB® Chief Economist Ann-Marie Lurie. “However, in Calgary, the gains have not been enough to change the low inventory situation thanks to strong demand. Our market continues to favour the seller, driving further price growth.”

As of November, the benchmark price was $572,700, up over last month and nearly 11 per cent higher than November 2022. Year-to-date, the average benchmark price has risen by over five per cent.

Detached

Limited supply choice for homes priced below $700,000 has been the primary cause of the decline in detached home sales. While November reported a marginal gain over last year, year-to-date sales have declined by 20 per cent. November saw a rise in new listings compared to the previous year, but higher-priced homes drove most gains. This has left the detached market with exceptionally tight conditions for prices below $700,000 and more balanced conditions for higher-priced homes. Overall, the month of supply remains exceptionally low at under two months.

Persistently tight conditions continue to cause further price gains in the detached market. As of November, the unadjusted benchmark price reached $699,500, a slight increase over last month and over 13 per cent higher than last November. While detached home prices are much higher than last year's levels in every district, year-to-date gains are the highest in the most affordable districts of the North East and East. 

Semi-Detached

November saw a boost in new listings compared to last year, helping to prevent a year-over-year decline in inventory levels. However, inventory levels are still over 40 per cent below typical levels seen in November. With a sales-to-new-listings ratio of 77 per cent and a month-of-supply below two months, conditions remain exceptionally tight, especially for homes priced below $700,000. 

Despite tight conditions, benchmark prices remained stable compared to last month. However, at an unadjusted benchmark price of $628,700, prices are still over 12 per cent higher than last year. The year-to-date average benchmark price has risen by nearly seven per cent, with the largest gains occurring in the North East and East districts.

Row

New listings rose again this month compared to last year. The 370 new listings were met with 267 sales, and for the first time since 2021, the sales-to-new-listings ratio fell below 75 per cent. The jump in new listings was enough to support a gain in inventory levels compared to last month and last year. While inventories are still nearly half the levels we traditionally see, this did help cause the months of supply to push up to 1.6 months, a significant improvement from the less than one month of supply that has persisted over the past seven months. While conditions are much more balanced in the higher price ranges, there is less than one month of supply for homes priced below $500,000.

Despite the shift away from exceptionally tight conditions, prices still rose over the last month and last year. As of November, the unadjusted benchmark price reached $429,100, 21 per cent higher than last November and an average year-to-date gain of nearly 13 per cent.

Apartment Condominium

Thanks to the relative affordability of the apartment-style homes, sales continued to reach record highs in November, contributing to year-to-date sales of 7,487. With one month left in the year, sales have already surpassed last year’s record high. This, in part, was possible thanks to the growth in new listings. While inventory levels are similar to levels reported last year, with less than two months of supply, conditions still favour the seller, placing further upward pressure on prices. 

The unadjusted November benchmark price reached $320,100 in November, a monthly gain of over one per cent and a year-over-year increase of 18 per cent. Year-to-date price gains have occurred across every district in the city, with some of the largest gains arising in the lower-priced North East and East districts.

REGIONAL MARKET FACTS

Airdrie

Gains in November sales were not enough to offset earlier pullbacks, leaving year-to-date sales down by over 26 per cent over last year's record levels. Much of the decline has been driven by the detached market, which has struggled with supply, especially in the lower price ranges. New listings in November did improve over last year's levels. Still, thanks to the gain in sales, the sales-to-new listings ratio rose to 96 per cent, preventing any significant shift from the low inventory levels. 

With less than two months of supply, we continue to see upward pressure on home prices. In November, the unadjusted benchmark price rose over last month, reaching $524,500, a year-over-year gain of 11 per cent. Year-to-date price gains have been the highest in the apartment sector at 17 per cent, with detached and semi-detached prices rising by nearly six per cent.

Cochrane

With 87 new listings and 51 sales, the sales-to-new listings ratio fell to 59 per cent in November, the first time it fell below 60 per cent since 2020. Higher-priced properties have primarily driven the recent gain in new listings. Improved new listings compared to sales did help support increases in inventory levels. However, November inventory levels remain over 30 per cent below long-term trends.

Tight market conditions have supported further price growth in Cochrane. As of November, the unadjusted benchmark price reached $548,600, a monthly gain of over one per cent and a year-over-year increase of 11 per cent. On average, year-to-date benchmark prices have increased across all property types, with the most significant gains occurring in the apartment condominium sector at over seven per cent. 

Okotoks

November saw a boost in new listings, helping support some of the year-over-year gain in sales. The rise in new listings compared to sales also helped support gains in inventory levels. However, inventory levels are nearly half what we would typically see in the market in November. Nonetheless, the shift this month did help push the months of supply up to nearly two months. 

While the months of supply did improve, conditions remained exceptionally tight, and prices continued to trend up this month. As of November, the unadjusted benchmark price was $590,200, a one per cent gain over last month and over eight per cent higher than last November.

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