National data won’t be available until later this month, but early data suggests it won’t be flattering. Looking at major markets, RBC economists saw further demand erosion in January. The bank warns that demand is eroding faster than supply, with few exceptions, resulting in further downward pressure on home prices in the near term.
Canadian Real Estate Markets See Sales Erode Faster Than Listings
There was a theme in almost all major Canadian real estate markets last month—weak demand. Sales came in lower than last year in the Big Five markets that have reported January sales so far. It won’t be until next week that CREA releases comprehensive existing home sales data, but the trend doesn’t look great.
“Supply-demand conditions weakened further in most large Canadian markets as January unfolded,” explains RBC economist Rachel Battaglia. “Demand plummeted in several markets— particularly Vancouver and Fraser Valley, while Edmonton, Winnipeg and Saskatoon posted notably weak results.”
The bank notes only two exceptions to falling seasonally adjusted sales were observed, in Calgary and Regina. However, these “outliers” didn’t fare much better when it came to prices. Inventory still outpaced sales, applying the same downward pressure on prices across most of the country.
Toronto & Vancouver Home Sales Fall, Inventory Climbs
Home sales eroded in both Toronto and Vancouver, markets that traditionally represent the lion’s share of national sales. Seasonally adjusted existing home sales in Toronto (-9.9% m/m) made a substantial slide, though not as sharp as the drop in Vancouver (-30% m/m). Inventory in both regions made modest increases, but amidst weak demand, both real estate boards have seen total inventory accumulate to unusually lofty levels. The bank notes these conditions have helped to push Toronto home prices down for the 22nd consecutive month, with the last being “the sharpest drop in three years.”
Vancouver home prices made a more modest drop, but the bank noted more downward factors than mitigating ones. “… the market continues to face poor affordability and elevated supply for buyer demand. We see this dynamic keeping prices relatively soft in the months ahead,” explains Battaglia.
Calgary Home Sales Rise, But Listings Continue To Outpace Demand
Calgary home sales were one of the rare national exceptions, where sales actually climbed. January seasonally adjusted sales rose 7.3% from December, but came in 14.8% lower than last year. New listings fell at roughly a quarter of the pace sales declined, indicating the demand balance still softened further. The bank notes prices fell 4.7% from last year, adding that detached homes held up better than higher-density units.
Persistently elevated inventory is likely to place a drag on the market’s near-term price growth. “Lots of residential construction in the pipeline suggests inventory will remain elevated, preventing dynamics from shifting into the seller’s favour without an adequate increase in demand,” says the bank.
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