One of the defining trends during the pandemic has been Canadians’ insatiable appetite for buying a home. Supercharged demand soaked up supply like we’ve rarely seen before, leaving buyers with fewer and fewer options to pick from. This was in full display in early reports for October published by local real estate boards. For-sale inventories dropped 8% to 55% below already-thin levels a year ago in some of Canada’s major markets. Tight demand-supply conditions became even tighter. So much so that home prices—which appeared to be on a moderating path this summer—gathered more steam.



The MLS Home Price Index (HPI) accelerated for the second-straight month in Vancouver, the Fraser Valley and Toronto, and for the first time in five months, in Edmonton. Clearly, this housing cycle is far from over and the persistence of bidding wars continues to drive up property values in many parts of the country. Still, the uptick this fall is possibly related to buyers rushing to land deals before interest rates rise. Bond yields (movements of which often lead mortgage rate changes) have picked up materially since September. Any rush to lock-in low rates would likely be a short-lived phenomenon, as it merely represents a displacement in time (forward) of activity.

Our view remains that deteriorating affordability (arising from soaring prices or higher interest rates, or both) and easing pandemic restrictions will gradually cool demand over the coming year. We expect extremely tight demand-supply conditions will keep prices under intense upward pressure in the near term though we see such pressure easing significantly by the second half of 2022 as markets achieve a better balance.

Toronto area—Home prices reaccelerating

Exceptionally low inventories have challenged buyers all year. Things got even tougher in October with listings falling further. Still, that didn’t stop the market from recording more deals. Home resales increased nearly 10% from September. Though down 6.9% from a year ago, the level of activity was very strong historically. And now home prices are accelerating again. Tighter demand-supply conditions produced stronger price gains in the past two months, including a whopping 4.3% m/m advance for the composite MLS HPI in October. This rivaled the type of increases we saw at the start of this year when the market was on fire. Compared to a year, the index is up more than 24%, the fastest pace in four years.



Both single-detached homes and condo apartments became more expensive—rising 29% and 15% y/y, respectively. Parts of the 905 area are especially hot. Properties in the Durham, Halton and Peel regions were the quickest to sell (ranging from 12 to 15 days from the initial listing) and went for the highest premiums over asking prices (7% to 15%). Clearly, demand for suburban homes shows no signs of abating as pandemic restrictions ease, while condo demand is rebounding solidly (condo sales soared 29% y/y across the entire GTA in October).

Montreal area—Sales tick higher despite the dearth of inventories

The market took a breather from its cooling trend last month. We estimate home resales picked up more than 4% from September, and price indicators showed a faster rate of increase after easing in the prior four months. The one constant, though, is the dearth of inventories. In fact, inventories became even more scarce as active listings fell deeper relative to a year ago (-20.5%). The lack of supply has been a main factor restraining activity across the entire Montreal region since winter. This was especially the case in the Laval and North Shore suburbs, and the Saint-Jean-sur-Richelieu exurb, where supply has plummeted on record influxes of buyers in the past year.



Extremely tight demand-supply conditions in these areas have led to some of the region’s stronger price gains. While single-family homes still get the most attention, relatively more affordable condos have drawn increasing interest. Suburban condos, in fact, have gone up significantly in value compared to a year ago—median condo prices increased between 22% and 26% y/y, mostly surpassing gains of 14% to 24% for suburban single-family homes. Median price gains were more subdued on the pricier Island of Montreal, ranging between 12% y/y for single-family homes and 13% for condos in October.

Vancouver area—Deviating from the cooling trend

The market continued to be unusually busy in October. Resales were up 22% above their 10-year average for the month (albeit down 5.2% from exceptionally strong numbers a year ago). This worked out to an increase of more than 9% from September on a seasonally-adjusted basis, deviating from the cooling trend since spring. Listings—both new and active—fell materially again, further tightening demand-supply conditions and intensifying upward price pressure. The MLS HPI responded in kind by rising at its fastest pace (14.7% y/y) in more than three years. Condo apartments accounted for most of the price acceleration. The rate of increase in this category’s HPI picked up from 8.4% y/y in September to 9.5% y/y last month. The rate for the single-detached home HPI was virtually unchanged at 20.5% y/y.



Calgary—Still super active as fourth wave taken in stride

By all accounts, buyers and sellers haven’t been fazed much—or at all—by the fourth wave’s severity in Alberta. They’ve remained super active amid soaring covid cases and hospitalizations over the last three months, sustaining near-record sales levels. Resales in fact rose month-over-month in Calgary in September and (by our own calculation) October, and were up a solid 24% from a year ago in the latest period. Sellers continue to hold a position of strength in the market. Low inventories relative to demand gives way to strong competition between buyers, which maintains property values on an upward trajectory. Calgary’s MLS HPI was 8.6% y/y in October with single-detached homes commanding a firmer 10.0% y/y price gain. Relatively plentiful inventories are holding back condo prices (HPI up just 1.2% y/y) but possibly not for much longer if the recent firming sales trend persists.



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Robert Hogue is a member of the Macroeconomic and Regional Analysis Group, with RBC Economics. He is responsible for providing analysis and forecasts for the Canadian housing market and for the provincial economies. His publications include Housing Trends and Affordability, Provincial Outlook and provincial budget commentaries.

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