Canadian Real Estate Inventory Is Rebuilding Very Rapidly: RBC 

Canada’s largest real estate markets have seen sales plummet, helping inventories. That was the message from RBC, who warns that existing home inventories in the country’s major markets are rapidly replenishing. In a note to investors, they explain that a flurry of new home completions and the start of the monetary easing cycle is motivating sellers. However, the same can’t be said for buyers who are taking a step back from the market, contributing to a price slowdown.

Canada’s Largest Real Estate Markets Are Seeing Inventory Rise

Major markets are seeing home sales weaken much faster than inventory. Home sales fell more than new listings in Toronto, Vancouver, Montreal, Calgary, and Fraser Valley. This has generally been the trend over the past year, helping to ease pressure on these markets. 

“We suspect many sellers are timing their move ahead of interest rate cuts with expectations of a rebound in demand,” explained Rachel Battaglia, the RBC economist who authored the report. 

She adds, “A rise in new condo completions in the Toronto area and struggling homeowners (including investors) are likely compelling more property owners to sell too.” 

Canadian Real Estate Sales Plummet While Inventory Builds

Source: RBC. 

New inventory remains resilient, but as the above data shows—this is a story of lackluster demand. The start of the easing cycle has motivated more sellers, but buyers have been taking a step back—likely waiting to see how this situation evolves.  

Canadian Real Estate Prices Are Slowing As Sales Plummet

Source: RBC. 

“We think most buyers will wait for steeper rate cuts before jumping into the market as the lagged impact of high interest rates keeps budgets under pressure,” notes Battaglia.

Less inventory pressure means less motivation for prices to rise, and that’s what’s happening. June’s annual price growth showed contractions in Fraser Valley (-3.2%), and Toronto (-4.6%). Low growth is also observed in Montreal (0%), and Vancouver (+0.5%). The only exception is markets in Alberta, with gains observed in both Calgary (+8.5%), and Edmonton (+7.0%). 

“The influx of supply has shifted more of the bargaining power to buyers, who in some markets are still extracting price concessions from sellers,” she explains. 

Further adding, “We suspect many sellers are timing their move ahead of interest rate cuts with expectations of a rebound in demand.”

17 Comments

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  • Reply
    Ethan Wu 6 days ago

    Exactly how monetary policy is supposed to work. They lower rates to pull forward demand, now the buyers in this window have already made their purchases.

    The goal of low rates is to cause inflation by piling in demand into a small window and raise competition. Probably two years of buyers pulled forward, so…

    • Reply
      RW 6 days ago

      Bingo. This is the intended consequence. The Bank of Canada just can’t say it out loud, but they’re to pull prices back to the trend line so it’s the same price before the boost + inflation + maybe a little growth.

      Imagine monetary policy as a car. Good drivers will get you where you need to be with smooth acceleration. Clowns like tiff will get you there, but they do it by smashing the gas, letting the car coast, then smashing the breaks. We’ll get where we need to be but we’ll be sick as Tiff learns how to drive.

    • Reply
      Sean Nethercott 5 days ago

      The problem is that despite the bank of Canada using rates to drop prices, the feds keep trying to keep prices high along with the banks. This is a disaster waiting to happen, as we have housing prices that are completely unreasonable, now we are seeing unemployment, and soon a wave of repos will hit the market in the GTA and Vancouver. This will cause banks to stop lending, and then prices will collapse.

  • Reply
    Omar 6 days ago

    Going to be interest considering how much new inventory isn’t purchased by end users, but often owned by agents and investors that didn’t have the money to actually close—they were hoping to flip the listing to some schmuck in the days pleading up to putting the money down.

    • Reply
      Mortgage Guy 6 days ago

      Ain’t this the truth. A lot of private financing being arranged to bridge the gap between what the banks will fund and how much these people paid. I’m sure some are end users, but it certainly looks like a lot of investors that are hoping they can flip it in the next year.

  • Reply
    Slick Rick 6 days ago

    We haven’t seen anything yet.

  • Reply
    Ed 6 days ago

    well lookie here….. the MSM, the RE industry, and the Gov’t has been telling us there is a shortage of housing.. there actually isn’t .. what there is is a shortage of AFFORDABLE housing … these are two different things

    • Reply
      Ian Brown 6 days ago

      Important for people to remember that demand needs to be QUALIFIED, otherwise it’s just a fantasy. Building $500k condos that are 300sqft aren’t going to be absorbed by the thousands of kids that took out massive loans to study a nonsense degree at a school that popped up overnight with no local students.

      They also probably botch the population estimates as per Stats Can’ts acknowledgement of Punwasi’s claim they can’t estimate emigration of temporary and permanent residents.

      • Reply
        Ed 6 days ago

        Agreed !

        The fundamental issue is with AFFORDABILITY.. There is plenty of supply for fraudsters and offshore money launderers.. For the average stiff who still attempts to earn a living the old school way, the average salary is $50,000 or something. Assuming 2 in a family earning the same income, giving a household income of $100,000, this means the most they can qualify for under normal rules is maybe $400-500,000. That’s with clean credit and a modest deposit.. House prices are roughly double that at a 10 or even 12 to 1 price/income ratio..

        That is why when the tide went out, suddenly we find there are very few qualified buyers. Odd adjustments to the interest rates do not change that equation, they would have to go back down to 1% again, which now the BOC has (hopefully) learned a lesson that it should have known (cheap capital stokes inflation and asset bubbles)all along won’t happen again for a very long time.

        As for the offshore money launderers, they see which way it’s going here, and are already bailing.

      • Reply
        Monica Dottes 2 days ago

        this comment is condecneding, its not “young epople with worthless degrees” lol lots of education is cheap in canada (well in quebec) and lots of degrees are VERY useful. lots of people study enegneering or carpentry etc, but a entry level job or even after years does not pay enough to cover a house. or condo. and who would want a 300sq place. canèt get a partner, living wiht you in that box, nor ever a faimly. so why would you ? all the units were built for investment. and lack of regulations, and goverment to get the correct types built

    • Reply
      Parzad 6 days ago

      Exactly, Just they say the need of “more housing” and “affordable.” (Developer to media then politicians)
      How can be affordable, when all involved into this want to make money,….

    • Reply
      Nadia 5 days ago

      Bingo! Exactly! All the while they no on high interest that’s destroyed the middle class and small business. For what? The truth still remains to be seen.

    • Reply
      Goo Goo Doll 4 days ago

      @ Ed, this isn’t a shortage question. This is people trying to offload properties before the Capital Tax increase and inbound mortgage renewals.

  • Reply
    Reality Bites 6 days ago

    Should read:

    “We think most buyers will wait for steeper price cuts before jumping into the market as the lagged impact of high interest rates keeps prices under downward pressure.”

  • Reply
    [email protected] 6 days ago

    NOBODY IS BUYING. THEY CAN GET NEW HOUSES IN THE USA FOR LESS THAN 400K.

  • Reply
    Curtis C 6 days ago

    Sixty Percent Drop in Real Estate Prices Before most people are even close to not having a mental health and addictions issue.

  • Reply
    Cello 5 days ago

    This is the problem, people still believe interest rates are going to drop, like back in 2020. We will never see rates that low again.

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