Canada’s major housing markets appear to be shifting direction this spring. After a few months of sluggishness, early results from boards indicate that activity has picked up significantly in most markets, and prices have ticked higher.
“There were hints for some time the cyclical bottom would be reached this spring, but April pretty much sealed the deal,” Robert Hogue, assistant chief economist, RBC Economics, explained in a recent report. “Early results from real estate boards gave strong indications local markets turned a corner last month.”
The pause in the Bank of Canada’s aggressive rate hike campaign has given buyers more confidence to house hunt and more properties were put up for sale in April, albeit in limited numbers.
Toronto, Vancouver, and Calgary led the way in the recovery, with Montreal not far behind. However, Hogue notes that despite the strong gains in April, affordability remains a huge issue, especially for first-time buyers.
Hogue writes, “The coming months should be quite interesting. The other side of the valley promises a better environment for sellers who might have previously been reluctant to sell in a down market. This will hopefully bring in more supply and prop up historically low inventories.”
The economist suggests that the end of price corrections will encourage market-timing buyers to make purchases, which could prolong April’s gains. However, the issue of affordability will continue to be a major concern, particularly for first-time buyers. Hogue believes this factor will severely restrict any potential market recovery, at least initially.
Toronto’s market picks up steam
Toronto’s market got notably busier in April, with resales jumping 27 per cent from March (seasonally adjusted). A 6.5 per cent rise in new listings gave buyers more options to bid on, but new sellers only met rebounding demand partway.
Demand-supply conditions tightened for a fifth-straight month and now look as firm as they were before the market’s downturn. This helped push the price recovery forward.
The GTA’s MLS HPI rose for the second consecutive month by 2.4 per cent month-over-month in April—Hogue expects further increases will likely follow if conditions remain this tight.
The economist explains, “Sellers hold the key to the market’s trajectory to a large extent. Much will depend on the degree to which they make their way back into the game and reshape (currently low) inventories.
“Our view is that a growing number of them will indeed list their home for sale now that property values have turned a corner. And this should keep any price appreciation relatively contained.”
Montreal sees spring revival
With warmer temperatures, Montreal’s market has also picked up, and the Bank of Canada hitting the pause button on rate hikes pulled the market out of its deep slumber in April.
Resale transactions rose an estimated 12 per cent month-over-month, reversing part of the sharp 34 per cent decline seen since early 2022. Spring, but more so the growing perception the market is bottoming, has also reinvigorated sellers. This has resulted in fiercer competition for each available property, contributing to the end of the year-long price slide.
Median prices for both single-family homes and condominiums rose modestly between March and April. Hogue predicts that tighter demand-supply conditions will support further slight increases in the period ahead.
Vancouver’s correction appears to be over
Vancouver saw a notable uptick in activity in April as more buyers returned to the market, likely sensing that the correction had run its course.
The influx of properties up for sale added some excitement, but the increase in new listings did not come close to the estimated 30+ per cent jump in resales. Faster-rising demand than supply put heat on prices. After falling nearly 10 per cen from the March 2022 peak, the area’s MLS HPI went up in the past two months, including a 2.3 per cent month-over-month gain in April.
“Tighter demand-supply conditions will likely keep prices on an upward trajectory in the period ahead,” Hogue says. “But we continue to believe that extremely poor affordability will significantly limit the speed at which they will rise.”
Calgary’s market remains robust
Calgary’s market appears to have weathered the storm well, with home resales rebounding a strong 28 per cent month-over-month in April, according to RBC calculations. Prices also ticked higher as the benchmark price for a home reached a record high.
The market remained impressively robust over the past year despite the sharp drop in activity. Resales never fell below pre-pandemic levels, and the MLS HPI kept a holding pattern, bucking the declining trend seen in virtually every other market in Canada. With market conditions tightening in the past three months and now favouring sellers, Hogue expects prices will appreciate some more in the period ahead.
