Canada’s real estate markets ended the year with an unusually busy month, without a lot of sellers. Canadian Real Estate Association (CREA) data shows the sales to new listings ratio climbed across the country in December. Every major market saw much tighter inventory than last year, relative to sales. Over three-quarters of markets are “seller’s markets,” where prices are expected to rise in the near-term.
Sales To New Listings Ratio (SNLR)
The sales to new listing ratio (SNLR) is the number of home sales, expressed as a percent of new listings. This helps analysts determine the flow of inventory, and potential shortages. Knowing if inventory will accumulate or be short, helps determine where prices are likely to head. It’s a simple indicator, but it can yield a lot of insight.
What’s a good ratio? That depends on the market, and it’s relative change in contrast to historic levels. Many markets will always have a high or low ratio. It’s more about the individual change in contrast to historic levels. That said, there are some guidelines analysts use, for a general estimate.
The higher the ratio, the higher the expectation of price movement. A ratio above 60 percent is a seller’s market, and prices are expected to rise. When it drops below 40 percent, it’s a buyer’s market and prices are expected to fall. Between 40 and 60 percent is a balanced market, where the market is priced correctly for demand. As previously stated, it’s relative to the individual market’s baseline. High volatility can also see the market act more like the direction it’s heading in, instead of where it’s at. This number should be just one of the many indicators you use to determine where prices are moving.
Quebec Real Estate Markets Are The Tightest For Inventory
Quebec real estate is leading when it comes to tight markets, taking the top three spots for highest SNLR. Trois Rivieres has the highest SNLR at 97.3 percent in December, up 25 points from last year. Sherbrooke was the second highest SNLR at 91.3 percent, up 21.4 points from last year. Gatineau came in third with an SNLR of 89.4 percent, up 16.8 points from last year. All three of these markets are in highly restricted lockdowns. This is likely preventing many from moving, contributing to the inventory shortage.
Canadian Real Estate SNLRThe sales to new listings ratio (SNLR) for major Canadian real estate markets in December. Source: CREA, Better Dwelling.
Western Canadian Markets Have The Lowest Ratios
Western Canadian real estate markets have the lowest relative demand, but it’s still high. Edmonton has the lowest SNLR at 54.3 percent, up 6.1 points from the same month last year. Saskatoon follows with the second lowest SNLR at 55.8 percent, up 13.1 points from last year. Greater Vancouver is the third lowest with 56.8 percent, up 8.6 points from last year. Yes, the lowest regional markets are still in balanced territory.
The country’s largest real estate markets took the bottom two spots for growth at very different levels. Greater Toronto’s SNLR came in at 61.1 percent in December, up 3.3 points from the same month last year. Montreal showed the second smallest climb with an SNLR of 82.5 percent, up 4.1 points. Both markets show improved demand from last year. However, Montreal’s inventory is much more scarce, relative to the number of buyers.
Markets are tight across Canada, even in places that have a net outflow of residents to other regions. The trend is likely supported by pandemic restrictions, deterring sellers. This would help push inventory levels lower than they naturally would be. At the same time, buyers are trying to take advantage of historically low mortgage rates. This has sparked a debt fueled buying spree, especially in the burbs. Combine this with rising demand for bigger work-from-home spaces, and it makes sense why small cities are seeing such a surge in demand.
Like this post? Like us on Facebook for the next one in your feed.