The cooling trends that emerged this spring are still firmly in place across Canada’s housing markets. Early reports from local real estate boards for the most part showed both resale activity and prices continuing to soften in August. Toronto and Hamilton however saw a modest monthly resales increase—which we think is nothing more than volatility around the (clearly downward) trend. The fact remains that the majority of markets in Ontario, British Columbia and Quebec operate well below pre-pandemic levels at this stage. Easing demand-supply conditions and souring sentiment are fueling the price correction. They provide buyers with a stronger hand in negotiations, helping them to reverse some of the enormous appreciation that occurred during the pandemic. This process is most visible in the suburbs and exurbs of Toronto and Vancouver where price drops have been most significant to date.

Rising interest rates are pushing many buyers to the sidelines and reducing the purchasing budget of others. Our expectations for the Bank of Canada to hike its policy rate to 3.5% by the fall will keep chilling markets in the months ahead. We see the downturn intensifying and spreading as buyers take a wait-and-see approach while ascertaining the impact of higher lending rates. Canada’s least affordable markets Vancouver and Toronto, and their surrounding regions, are most at risk in light of their excessively stretched affordability and outsized price gains during the pandemic.

Toronto area—Buyers haven’t given up

The market took a breather from the steep drop in activity since spring. Home resales in fact rose 11% between July and August on a seasonally-adjusted basis—though still remained well below pre-pandemic levels. While it’s too early to call it a bottom, we view it as evidence buyers haven’t given up and are ready to pull the trigger on the right opportunity. Price corrections may provide more opportunities. Toronto’s composite MLS HPI fell for the fifth-straight month, down another 2.8% (-$32,900) to $1.12 million. Since the March peak, the index has lost almost 16% in value or more than $210,000. Suburban single-detached home prices have seen the biggest declines, especially in the Halton and Durham regions. Condo prices, however, have been more resilient. We expect these diverging trends to persist near term as buyers focus on relatively more affordable options such as condos.

Montreal area—Summer blues

The sharp downturn seen in other major markets may be spreading to Montreal after all. Resale activity dipped noticeably last month, falling an estimated 15% from July (seasonally adjusted) and 20% from August 2021. This is the first time this year the market deviated from its slow and steady moderating trend. The softening in prices also gathered intensity. The median price for single-detached homes fell the most (down 4.5% from July) so far this cycle—extending the decline to date to -9.5%. The cumulative decline in the median condo price is a lesser -6.1%. We think the market will continue weaken in the period ahead as higher interest rates challenge buyers. That said, demand-supply conditions are still balanced overall, which should keep prices from spiralling down.

Vancouver area—Downturn in full swing

There are no signs the market has reached the bottom yet. Activity and prices are still heading south—home resales falling a further estimated 4% and the MLS HPI 2.2% m/m in August. Since the winter peak, home resales are off 46% and benchmark prices 6.7%. Suburban markets are under heavier downward pressure. Pitt Meadows (-11.3%), Maple Ridge (-10.9%), Port Coquitlam (-10.4%) have recorded the largest price declines over the past three months in the Greater Vancouver Area. Still, these come short of corrections taking place further east in the Fraser Valley in places like Cloverdale (-12.4%) and Mission (-15.2%) where appreciation in the prior year had been massive. The sharp rise in interest rates and partial return to office are evidently causing buyers to more significantly reprice properties away from Vancouver’s urban core. We expect activity to stay quiet in the months ahead in the entire area as the market continues to adjust to the new realities. Higher interest rates are a big pill to swallow for buyers facing the some of the steepest home prices in Canada.

Calgary—Mild correction underway

The market continues to moderate from sky-high activity levels at the start of this year. But even after six consecutive monthly declines—including a modest estimated 2% m/m drop in August— home resales remain brisk and far above where they were before the pandemic. Higher interest rates have weighed on property values in recent months despite persistently tight demand-supply conditions. Calgary’s composite MLS HPI has lost close to 3% of its value since it peaked in May, including a 1.9% decline last month. We think the downward trajectory is likely to be maintained near term but we don’t see it accelerating much or at all. The market is relatively affordable, making buyers in the area less sensitive to interest rates than counterparts in expensive cities like Vancouver or Toronto. Alberta’s much improved economy, job market and in-migration flows also set a more favourable backdrop for buyers.


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Robert Hogue is responsible for providing analysis and forecasts on the Canadian housing market and provincial economies. Robert holds a Master’s degree in economics from Queen’s University and a Bachelor’s degree from Université de Montréal. He joined RBC in 2008.

This article is intended as general information only and is not to be relied upon as constituting legal, financial or other professional advice. A professional advisor should be consulted regarding your specific situation. Information presented is believed to be factual and up-to-date but we do not guarantee its accuracy and it should not be regarded as a complete analysis of the subjects discussed. All expressions of opinion reflect the judgment of the authors as of the date of publication and are subject to change. No endorsement of any third parties or their advice, opinions, information, products or services is expressly given or implied by Royal Bank of Canada or any of its affiliates.