Could activity heat up again?
Housing markets across the country are mostly continuing to see more balanced conditions emerge at the onset of fall, according to a new report by Royal Bank of Canada (RBC) assistant chief economist Robert Hogue.
Demand-supply imbalances are beginning to correct in the Vancouver, Fraser Valley, Toronto and Hamilton markets, Hogue said, as more sellers begin to list their properties, with Calgary and Edmonton also experiencing rebalancing “to a much lesser degree.”
A series of factors are likely to temper demand and prevent the prospect of a market resurgence in the fall, including prohibitive borrowing costs and ongoing economic uncertainty, according to the report.
“We think the fall season may look a lot like August with buyers staying on the defensive in many parts of Canada despite more choice becoming available to them,” Hogue said. “High interest rates, ongoing affordability issues and a looming recession are poised to pose major obstacles. Any material acceleration in the recovery will have to wait until interest rates come down in 2024.”
Regional outlook remains uneven, report suggests
The report noted that Toronto had seen new listings and inventories rise at a rapid pace during the previous five months – a reflection of “sagging buyers’ sentiment” amidst those interest rate hikes and a gloomier economic outlook.
With the city’s aggregate MLS HPI (home price index) having slipped by 0.1% last month, activity and prices are expected to remain “mostly stagnant” in the near term, according to Hogue.
In the short term, we will likely continue to see some volatility in terms of sales & home prices, as buyers & sellers wait for more certainty on the direction of borrowing costs & the overall economy,- #TRREB Pres. @c21leadingedge. Latest #MarketWatch🔗➡️ https://t.co/3LUgc7NmCA pic.twitter.com/mSJW04ifYt
— Toronto Regional Real Estate Board (@TheReal_TRREB) September 6, 2023
Montreal is also witnessing an influx of homes for sale, with new listings having increased for the fourth time in five months in August, while in Vancouver a spring rally fizzled out as borrowers stepped to the sidelines once again.
“Clearly the Bank of Canada’s back-to-back rate hikes in June and July unsettled many prospective buyers [in Vancouver],” Hogue said. “Successive increases in the number of homes put up for sale since April – which reached a 15-month high in August – should have fired them up instead by offering opportunities to unlock pent-up demand that built during the year-long market correction. The net result is a more balanced market.”
Calgary, meanwhile, remains arguably Canada’s hottest market, according to the report, characterized by low inventories and “supercharged demand and explosive population growth.” Those are trends that show no signs of fading. “We see little that will cool down the market materially in the short term,” Hogue said.
