Canadian real estate markets kicked the year off with exceptionally weak demand. Canadian Real Estate Association (CREA) data shows the sales to new listings ratio (SNLR) slipped in January. Despite a host of measures to stimulate buying, the demand measures continued to erode as sellers significantly outpaced buyers. The issue has the county’s largest markets showing some of the weakest demand on record.
The Sales To New Listings Ratio
The SNLR is an industry-preferred indicator of fundamental demand, and does exactly what one would think it does; it’s the ratios of homes sold to homes newly listed for sale. A ratio between 40 and 60 percentage points (ppts) indicates a balanced market, priced right for demand. Above 60% and the ratio indicates the market is undersupplied, and typically leads to rising prices. Finally, below 40% is an oversupply and prices are expected to fall. Fairly straight-forward, right?
There’s a few caveats, with the biggest being velocity. Fast moving ratios often indicate a sudden shift in market pressures, and prices can move more like the ratio it’s heading towards rather than the actual print. For example, a suddenly tight market can see a sudden surge in ratio, and prices can rip higher with a balanced SNLR. At the same time, demand can fall off a cliff and prices plunge with the ratio also in balanced territory. These are just guidelines of market expectations.
For those actually in the market, it’s best to get the data for the individual region you’re searching for. Now for the data!
Canadian Real Estate Saw New Listings Grow At A Rate 8x Sales
For those that missed the national report last week, the market saw demand pressure ease further. The SNLR fell to 41.0% in January, sitting close to the lower bound of a balanced market. The ratio was 7.9 ppts lower than a year prior, and represented the lowest ratio since 2019. Behind the move was a surge in new listings, which advanced at a rate 8x that of home sales. It may be wishful thinking to dismiss the weakness due to bad weather, since that didn’t stop sellers from hitting the market.
Canada’s Tightest Markets Remain Federal Government Towns
Canada’s tightest markets were really tight last month, but all relatively small ones. The highest SNLR was in Thunder Bay (72.8% in January; +5 ppts y/y), followed by Saint John (69.9% in January; +18.4 ppts), and Sudbury (66.3%; -0.9 ppts). It’s worth noting that all of these markets are big hubs for Federal employees, who were recently ordered to work in office for this very reason—to bolster real estate demand.
The highest SNLR is still very high, but it’s a big improvement from a few years ago. Canada’s low-rate investor frenzy saw some markets with an SNLR above 100%, indicating a sharp draw down of inventory.
Toronto & Vancouver Real Estate Demand Is Amongst The Weakest In Canada
The sales to new listings ratio for major Canadian real estate markets.
Source: CREA; Better Dwelling.
On the flip side, Canada’s weakest markets were close to some of the weakest prints on record. Fraser Valley (25.4%; -16 ppts) was the weakest major market in January, with Niagara (28.1%; -10 ppts) trailing at a slight improvement. The next two markets just above these were also closely related, and also happen to be the country’s largest real estate markets. Uh oh.
Greater Vancouver saw its ratio plunge to unusually weak levels last month. The region’s SNLR fell to 28.3% in January, down 8.8 points from last year. It was the weakest January since 2019, and the second weakest since 2013. Despite not a lot of price movement, demand side pressures are eroding very fast. It’s also worth keeping in mind that the Greater Vancouver real estate board is so close to Fraser Valley, it’s not uncommon for agents to register with both boards. In other words, this is regional weakness.
Greater Toronto’s SNLR was slightly higher but trekking through historic weakness. The ratio fell to just 31% in January, dropping a mind blowing 19.8 ppts from last year. It was the worst January since 2009, and the second worst since 1996. A little tricky to dismiss that as just a weather related issue, especially following the weakest year for new home sales in the region since 1990.
While the industry expects the market to finally warm up this year, data from the start of the year seems to disagree.
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