The supply/demand equation is adding up to Canada’s major housing markets moving to favour buyers rather than sellers, according to Robert Hogue, assistant chief economist at RBC Economics in a June 7 note. “There’s been plenty of action on the supply side lately. More sellers have come to market and inventories are rebuilding, rapidly-so in the Toronto and Vancouver areas,” says Hogue. “This is altering bargaining positions with buyers coming out with a better hand.” Hogue says buyers in most markets in May were in a “wait-and-see mode” as the June 5 Bank of Canada announcement approached. “Little action took place transaction-wise in most major markets according to early reports from local real estate boards,” he says. “Home resales in fact slipped from April levels in most cases when adjusted for seasonal factors. Bottom line: the broad recovery that started late last year essentially stalled this spring.” Hogue says Calgary, with a nod to Edmonton, stands out for its vitality. “It racked up a solid gain last month. But other than pockets of strength in Prairie markets (including Edmonton), the general state of affairs in Canada’s housing markets is soft,” he says. A signal markets are headed to buyers’ territory, at least for a couple of months, is a levelling of prices. “The recent (mild) upturn in home prices is losing steam. The MLS Home Price Index in Toronto even edged lower sequentially in May,” says Hogue. “Any further easing will largely depend on buyers’ reaction to the Bank of Canada’s launch of a rate cutting exercise in June.” “Our view is it will take several cuts to pull a critical mass of buyers from the sidelines. Prices are likely to stay flat until then and appreciate gradually thereafter,” adds Hogue. “But with so much pent-up demand out there, it’s possible buyers jump back more quickly, which would set prices on a stronger trajectory.” Here are Hogue’s overviews of the Calgary, Vancouver and Toronto markets. .Calgary “The market is easily the hottest in the country at the present time with resales near pre-pandemic peaks and price appreciation outpacing all other markets,” says Hogue. “If anything, activity could be even stronger were there more supply.” Hogue says there was an increase in listings, which got buyers’ off their couches in May, leading to a 9% month-over-month bump in sales, which follows three months of easing activity amid historically low inventories. “Explosive population growth and a vibrant economy are sustaining exceptionally strong housing demand in Calgary. The MLS home price index (HPI) was up 9.5% year over year in May, led by gains in condo apartments (+17.9%) and single-detached homes (+13.0%),” says Hogue. “We see the current super tight demand-supply conditions continuing to propel property values higher in the near term. But rapidly eroding affordability may restrain the pace. Calgary buyers, like all others in Canada, face significant budget pressures. .Vancouver “Little action has taken place in the market lately at what should be a seasonal high point,” says Hogue. “We estimate resale transactions fell more than 5% month over month in May to a level that is 20% below where it was a year ago, and closer to 23% below where it was before the pandemic.” Low sales and sellers returning to the market have created a build-up of listings, with active listings reaching a four-year high of more than 13,600 units in May, however prices remained appreciating. “Vancouver’s MLS HPI was up 2.3% year over year last month, with both the detached home (+5.9%) and condo apartment (+2.2%) categories rising,” says Hogue. “Upward momentum is likely to wane if demand remains sluggish and inventories keep piling up.” “Indeed, the annual rate of price appreciation has steadily decelerated this year. Budget-constrained buyers have a limited capacity to bid up prices in this market, the least affordable in the country.” .Toronto The biggest story in Toronto is a rapid increase in listings, says Hogue. “Active listings were up 83% year over year in May to a decade high of 21,800 units,” he says. “Condo apartments led the way with a 95% rise, though single-detached homes also jumped significantly by 71%.” “A stronger flow of new listings, up 8.6% since March on a seasonally adjusted basis (including a 2.6% month over month rise in May) and a slowing pace in sales have caused inventories to spike. Home resales fell for the fourth consecutive month in May, down 1.8% from April and 18.2% since January. Rising supply and softening demand are giving buyers more bargaining power.” The Toronto-area MLS HPI edged lower by 0.4% month over month, the first monthly decline since January, says Hogue. “The index was down a larger 3.5% on a year-over-year basis, with dips ranging from -3.2% for condo apartments to -2.6% for single-family homes,” he says. “We expect higher inventories will continue to exert downward pressure on home prices in the near term amid intense unaffordability pressures.”
The supply/demand equation is adding up to Canada’s major housing markets moving to favour buyers rather than sellers, according to Robert Hogue, assistant chief economist at RBC Economics in a June 7 note. “There’s been plenty of action on the supply side lately. More sellers have come to market and inventories are rebuilding, rapidly-so in the Toronto and Vancouver areas,” says Hogue. “This is altering bargaining positions with buyers coming out with a better hand.” Hogue says buyers in most markets in May were in a “wait-and-see mode” as the June 5 Bank of Canada announcement approached. “Little action took place transaction-wise in most major markets according to early reports from local real estate boards,” he says. “Home resales in fact slipped from April levels in most cases when adjusted for seasonal factors. Bottom line: the broad recovery that started late last year essentially stalled this spring.” Hogue says Calgary, with a nod to Edmonton, stands out for its vitality. “It racked up a solid gain last month. But other than pockets of strength in Prairie markets (including Edmonton), the general state of affairs in Canada’s housing markets is soft,” he says. A signal markets are headed to buyers’ territory, at least for a couple of months, is a levelling of prices. “The recent (mild) upturn in home prices is losing steam. The MLS Home Price Index in Toronto even edged lower sequentially in May,” says Hogue. “Any further easing will largely depend on buyers’ reaction to the Bank of Canada’s launch of a rate cutting exercise in June.” “Our view is it will take several cuts to pull a critical mass of buyers from the sidelines. Prices are likely to stay flat until then and appreciate gradually thereafter,” adds Hogue. “But with so much pent-up demand out there, it’s possible buyers jump back more quickly, which would set prices on a stronger trajectory.” Here are Hogue’s overviews of the Calgary, Vancouver and Toronto markets. .Calgary “The market is easily the hottest in the country at the present time with resales near pre-pandemic peaks and price appreciation outpacing all other markets,” says Hogue. “If anything, activity could be even stronger were there more supply.” Hogue says there was an increase in listings, which got buyers’ off their couches in May, leading to a 9% month-over-month bump in sales, which follows three months of easing activity amid historically low inventories. “Explosive population growth and a vibrant economy are sustaining exceptionally strong housing demand in Calgary. The MLS home price index (HPI) was up 9.5% year over year in May, led by gains in condo apartments (+17.9%) and single-detached homes (+13.0%),” says Hogue. “We see the current super tight demand-supply conditions continuing to propel property values higher in the near term. But rapidly eroding affordability may restrain the pace. Calgary buyers, like all others in Canada, face significant budget pressures. .Vancouver “Little action has taken place in the market lately at what should be a seasonal high point,” says Hogue. “We estimate resale transactions fell more than 5% month over month in May to a level that is 20% below where it was a year ago, and closer to 23% below where it was before the pandemic.” Low sales and sellers returning to the market have created a build-up of listings, with active listings reaching a four-year high of more than 13,600 units in May, however prices remained appreciating. “Vancouver’s MLS HPI was up 2.3% year over year last month, with both the detached home (+5.9%) and condo apartment (+2.2%) categories rising,” says Hogue. “Upward momentum is likely to wane if demand remains sluggish and inventories keep piling up.” “Indeed, the annual rate of price appreciation has steadily decelerated this year. Budget-constrained buyers have a limited capacity to bid up prices in this market, the least affordable in the country.” .Toronto The biggest story in Toronto is a rapid increase in listings, says Hogue. “Active listings were up 83% year over year in May to a decade high of 21,800 units,” he says. “Condo apartments led the way with a 95% rise, though single-detached homes also jumped significantly by 71%.” “A stronger flow of new listings, up 8.6% since March on a seasonally adjusted basis (including a 2.6% month over month rise in May) and a slowing pace in sales have caused inventories to spike. Home resales fell for the fourth consecutive month in May, down 1.8% from April and 18.2% since January. Rising supply and softening demand are giving buyers more bargaining power.” The Toronto-area MLS HPI edged lower by 0.4% month over month, the first monthly decline since January, says Hogue. “The index was down a larger 3.5% on a year-over-year basis, with dips ranging from -3.2% for condo apartments to -2.6% for single-family homes,” he says. “We expect higher inventories will continue to exert downward pressure on home prices in the near term amid intense unaffordability pressures.”
