Sales slump to "lowest levels in a decade or more"
A new report from the Royal Bank of Canada (RBC) has found that Ontario and British Columbia are headed to a buyer’s market in the coming year as market activity in both provinces slows near the end of 2022.
In RBC’s latest housing update, assistant chief economist Robert Hogue said Ontario and BC markets have been “especially soft” as sales slumped to “their lowest levels in a decade or more,” with the exception of the pandemic shutdowns in 2020.
According to Hogue, the number of home resales have fallen “below pre-pandemic levels in most regions of the country,” including Victoria, Vancouver, the Fraser Valley, Guelph, Kitchener-Waterloo-Cambridge, London, Hamilton, Niagara, Toronto and Ottawa.
Moreover, while the country’s sales-to-new listings ratio of 0.50 is within “balanced territory,” demand-supply conditions in many markets across Ontario and BC have either tipped in favour of buyers or were close to the tipping point. In these markets, which included the Fraser Valley, Toronto, Ottawa, Hamilton, London and Niagara, the sales-to-new listings ratio was reported to be around the 0.40 threshold where buyers typically have more sway on prices.
Property values fall from peak in Ontario and BC markets
With buyers holding a stronger hand in the Ontario and BC markets, Hogue said it isn’t surprising to see that “some of the larger price declines” occurred in these places as well. Citing the MLS Home Price Index, he noted that property values have plummeted from their early 2022 peak in Cambridge (-21%), London (-19%), Kitchener-Waterloo (-19%), Brantford (-18%), Hamilton-Burlington (-18%), Kawartha Lakes (-17%), Barrie (-17%), Chilliwack (-16%) and the Fraser Valley (-13%), as well as the Greater Toronto Area (-12%) and the Greater Vancouver Area (-6%).
Outside of these markets, price erosion has been relatively moderate across Canada due to “tighter demand-supply conditions,” according to Hogue. In the Prairies, Quebec and Atlantic Canada, the MLS Home Price index fell by only single digits. Exceptions include Calgary and St. John’s, where the index was found to have plateaued, and Halifax, which saw a 10% drop.
“While we interpret the slowing of the pace of decline as a sign the market downturn has run most of its course, we don’t expect things to heat up again in short order,” said Hogue. “Higher interest rates and stretched affordability will continue to challenge buyers for some time. This will keep activity quiet for a while longer even if it stabilizes near current levels. We think benchmark prices will keep trending lower until spring.”
