Inventory rises in major markets, but high borrowing costs continue to dampen buyer activity
Sellers are returning to some of Canada's largest housing markets, but buyers seem hesitant to take advantage.
A new Royal Bank of Canada (RBC) housing report revealed an increase in new listings and inventories, with cities like Vancouver, Toronto and Montreal experiencing an influx of sellers.
“This could reflect a confluence of sellers that include many who took a pass at the fall market (when demand and prices dipped) in the hope of better outcomes this spring,” the report read. “Some of the sellers could be in distress in the face of high interest rates.”
Despite more homes available, buyers aren't rushing in. Home resales generally decreased between March and April, with Vancouver the only major market seeing a modest increase in activity.
Vancouver saw a 15% monthly surge in new listings, up 65% year over year. This is the highest level of active listings in the metro since September 2020.
While home resales rose 5% in April, most of the new inventory remained unsold. Vancouver home prices slowed slightly in April to 2.8% from 4.5% in March.
“High rates and poor affordability clearly continue to weigh heavily on buyers,” RBC said. “We expect such pressure to persist until several rate cuts have been implemented.”
The spring market is off to a slow start in Toronto, with home resales dropping for two consecutive months (-3.4%) in March and April even though new listings were up 5.9%. However, property values still managed to appreciate slightly, with the area's MLS HPI inching up 0.4% month-over-month in April.
Read next: Toronto condo sales stagnate, supply challenges ahead
In Montreal, the market rally lost momentum in April as home resales are estimated to have fallen 5% from March.
"April could just be another bump," the report suggested, noting the long road still ahead for resales to return to pre-pandemic levels, which remain about 30% higher.
High interest rates continue to deter potential buyers, although historically low inventories also constrain transaction volumes. Home prices in Montreal, particularly for single-detached homes, have ascended again after a soft patch in the fall.
Calgary continued to face tight supply conditions, with active listings near decades lows this year.
New listings have been consistently decreasing, with April marking the fifth consecutive month of declines. Despite some stagnation, Calgary's housing market remains vibrant, driven by substantial population growth and strong demand. The annual rate of price increase neared double digits (9.9% in April).
Home prices ticked up slightly in all major markets. For example, the MLS Home Price Index in Toronto rose for the third month in a row, although at a slower pace than before.
RBC anticipates a stronger, more sustained recovery won't happen until interest rates fall, likely in the latter half of 2024.
Make sure to get all the latest news to your inbox on Canada’s mortgage and housing markets by signing up for our free daily newsletter here.
