High interest rates, ongoing affordability issues, and a looming recession serve as major obstacles
The Canadian home resale market slowed in October according to the early results from the local real estate boards for last month, a new Royal Bank of Canada (RBC) analysis has said.
Transaction activity in home resales softened as demand cooled with rising ownership costs. The number of new sellers in Toronto, Vancouver, and the Fraser Valley continued to point upwards, although that trend showed signs of moderating.
With prices also beginning to level out or fall in Ontario and British Columbia, the rebalancing of market conditions has given buyers the upper hand when it comes to purchase offers.
Home resales in October
Toronto saw the quietest October in nearly quarter of a century as home resales fell by 5% from September, dropping for the fifth consecutive time. It was the lowest point seen since October 2000. New listings have also dropped by 2.9% month-over-month but did not stop the demand-supply conditions from softening.
The city’s MLS Home Price Index (HPI) dropped by 1.7% in October and noticeably reversed over 40% of the increase that was seen in spring and summer.
Montreal’s home resales fell by more than 10% month-over-month, a softness last seen in October 2001. Home prices saw a downward pressure as demand and supply loosened. The median price for single family homes was 0.7% lower month-over-month. Condo apartments saw a 3.0% decrease in price month over month. RBC expected prices to further decrease in the coming months.
Vancouver continued the weakening trend in its home resales with a 10% month-over-month decrease. Residential sales were lower compared to the same period in the previous year. New listings decreased by 3% month-over-month but the price momentum slowed as the lower number of sales drove the demand-supply conditions closer to a buyers’ market.
The city’s MLS HPI decreased by 0.6% in the previous month and remained unchanged. In the coming months, RBC said it expects the price to continue softening as the state of demand and the growing number of sellers end up favouring the buyers.
Calgary’s home resales decreased for the second month in a row with an estimated 12% drop. However, it continued to be the country’s hottest market as sellers still held a significant power in pricing as competition looms between buyers and low inventories.
Its MLSHPI increased by 9.7% compared to the same time last year, the fastest increase rate among major markets in Canada. RBC expected its price momentum to continue its positive pace in the coming months.
The bank also expected these trends to continue for the rest of the fall season as buyers will continue to stay on the defensive despite having more options to choose from while the high interest rates, ongoing housing affordability crisis, and a looming recession will serve as major obstacles.
