Over the past few months, more sellers have entered the housing market, particularly in September with a surge of new listings in all major Canadian markets. This is thanks to several things, notably rising borrowing costs from higher interest rates, as the latest report from Robert Hogue, assistant chief economist at RBC Economics, notes.
Rising interest rates | a push-pull effect
That said – at the same time, these higher rates drive away buyers and weaken demand, resulting in a more relaxed market. This is particularly happening in Ontario and British Columbia, followed by Calgary. Many locales – like Toronto, Vancouver and the Fraser Valley – are favouring buyers, or close to it.
The report states that prices are declining, albeit slightly, as the August and September MLS Home Price Index fell month-over-month for Toronto, Vancouver and the Fraser Valley. In Calgary, prices rose and demand-supply stayed tight.
“We expect little change in this broad picture in the months ahead. We think buyers will stay on the defensive in many parts of Canada despite more choices becoming available to them,” shares Hogue. He warns, “High-interest rates, ongoing affordability issues and a looming recession are poised to pose major obstacles. Any material acceleration in the market recovery will have to wait until interest rates come down in 2024.”
The Greater Toronto Area | the balance edges toward buyers
GTA buyers dealt with low inventory but now have more housing options available, with more sellers back on the market. In September, new listings went up by 11 percent, representing the sixth consecutive monthly increase. Yet, sales declined again, this time by 1.8 percent month-over-month. The culprits of this trend are low affordability, high-interest rates and increasing economic uncertainty.
As for prices, a looser demand and supply environment is bringing them down – the Home Price Index lowered month-over-month by about 0.2 percent in August and 0.8 percent in September.
“We expect further erosion in the near term with buyers holding a stronger bargaining position,” Hogue shares.
Vancouver | quickly softening
Demand-supply conditions in Vancouver have moved fast since June and were on the softer side last month. This is due to notable inventory boosts, especially in September, and cautious buyers (thanks to low affordability and high-interest rates).
“The upshot of this rapid shift has been an end to the price rally that began this winter,” Hogue comments. Indeed, Vancouver’s Home Price Index declined 0.2 percent and 0.4 percent month-over-month, respectively in August and September. He predicts that with rising inventories and new listings above pre-pandemic numbers, prices will trend downward.
Montreal | market recovery is slow with opposing sides
The Montreal market has been slow but is incrementally recovering from the sharp correction it endured in 2022. In September, resales went up nearly 9 percent from the same time last year and over 2 percent from last month.
“Two forces are at play: on one side, an influx of sellers since spring has helped unlock some pent-up demand; on the other, higher interest rates have made it more difficult for buyers to afford a home purchase – muting momentum,” explains Hogue. He notes things have eased between the demand and supply balance, and this maintains overall prices.
Last month, prices for Montreal area condominium units jumped 2.3 percent month-over-month but dropped over 2 percent for detached homes. However, prices of both home types went up a bit from September 2022. Hogue expects similar results over the coming months.
Calgary | on fire
The boom in Calgary’s population (thanks to less expensive home ownership costs than Ontario and B.C.) has the market buzzing. “This is attracting droves of buyers, and driving up real estate transactions and prices to historical highs,” Hogue notes.
For the sixth month in a row, sales went up last month (by about 4 percent month–over–month). Supply is trailing demand, though it continues to grow at a steady pace – keeping the buyer-competitive market favouring sellers.
Compared to Canada’s largest markets, the city’s Home Price Index went up the most in the last year – by 8.7 percent.
“Calgary is easily the tightest (and hottest) market in Canada at the moment … we think upward price pressure isn’t about to let up anytime soon,” shares Hogue.
Courtesy RBC Canada