Canadian Real Estate Correction Expected To Continue Into 2023: RBC

Canadian real estate showed some encouraging signs last month, but don’t be fooled. RBC Economics wrote to clients breaking down major markets that have reported November sales. Canada’s largest bank warned that the market is still firmly in correction mode, with just a few exceptions. Despite minor signs of firming, they see real estate markets continuing the decline into 2023. 

Canadian Real Estate Activity Is Below Pre-Pandemic Levels

Canada’s real estate markets might be showing some moderation of activity, but it’s still correcting. Sales activity is still below pre-pandemic levels, and prices are still falling in regions with outsized gains. 

“Canada’s housing markets are still squarely in correction mode,” explained Robert Hogue, Assistant Chief Economist at RBC. 

However, the correction has been mixed, explained Hogue. Markets with “outsized” gains have seen activity grind to a halt. That includes Vancouver, Fraser Valley, Toronto, Hamilton, Ottawa, and Montreal. 

Meanwhile, the Prairies have seen a notable exception. Calgary and Edmonton are both seeing activity above pre-pandemic levels. The bank attributes stronger provincial economies and rising immigration as reasons behind the boosted demand.  

Canada’s Major Real Estate Markets Are Mostly Balanced

The sales to new listings ratio (SNLR) is one method used to determine if markets are “hot” or not. Most of the major markets that have reported now fall within “balanced” territory. Though it’s important to remember that balanced is sometimes just a stop as regions move towards a “buyer’s” or “seller’s” market. November and December are also months where few people sell, so SNLRs tend to rise. This can deceptively appear to create the impression of stabilization, but may or might not be reflective of the market. 

With that said, Canada’s markets are now printing balanced SNLRs in the early data. RBC found Vancouver, Edmonton, and Montreal were all smack in the middle of balanced territory. Fraser Valley is a buyer’s market, where prices tend to see an accelerated erosion. Toronto is right on the border of a balanced, and buyer’s market, though ask a decent agent and they’ll likely say it feels more like a buyer’s market. 

Canadian Real Estate Demand-Supply Conditions

RBC estimated sales-to-new listings ratio. Seasonally adjusted for November 2022.

Source: REBGV; FVREB; CREB; RAE; TRREB; QPAREB; RBC Economics.

The one major exception to the trend is Calgary, where the SNLR is a scorching hot 86% in November. The oil boom, relatively affordable prices, and inflow of young adults has resulted in significant demand. It hasn’t led to much of an increase in listings, though. 

Despite reports of a firming market, and signs of resilience in markets like Calgary, RBC sees the correction continuing. “We expect the downturn to continue into the early part of 2023,” warned Hogue.