Canadian Real Estate Supply Rises, Prices To Moderate: RBC

Canadian real estate market activity is cooling, warned the country’s largest bank. RBC observed supply in virtually every major market rose in June. At the same time, they note that sales are growing at a much slower rate than in previous months. If the current market conditions hold, they expect price appreciation to grind lower. 

Canadian Real Estate Markets Get Hit With More Supply

Canadian real estate prices are chugging higher on the supply shortage narrative. Many experts, from BMO to Canada’s national statistics agency, challenge the narrative. No need to debate it though, because even more supply is hitting the market. 

“We estimate that more homes became available for sale in every major market last month,” explained Robert Hogue, assistant chief economist at RBC. 

He adds, “That came on the heels for sizable broad-based increases in May.”   

In plain english, prices increased and the market responded with more sellers. More money motivated more people to sell—shocking, we know. 

Buyers Hit Pause On Expensive Markets, Affordable Ones Keep Going

The national trend is more supply, but the response is more mixed. RBC notes a “retreat” of buyers in Toronto, Hamilton, Ottawa, and Vancouver. Those happen to be amongst the most expensive real estate markets in the world. High prices mean a greater sensitivity to leverage changes due to interest rates.

The bank appears most surprised by the rapid shift in Toronto real estate. “The surprisingly quick rebound in [Toronto real estate] activity this spring lost steam last month,” said Hogue. 

In contrast, markets less sensitive (read: cheaper) weren’t as strongly impacted. The bank noted no moderation in Fraser Valley, Calgary, Edmonton, and Montreal. Lower priced markets are less sensitive to leverage changes. 

“It underlines that there isn’t a ‘one-size-fits-all’ approach to real estate trends, and local factors can significantly influence how national or global economic trends manifest at a regional level,” says Hogue. 

Canadian Real Estate Price Growth To Slow If Conditions Hold

RBC sees more challenges than growth in the coming months for real estate markets. Higher interest rates and affordability challenges make a surge of buyers unlikely. Soaring prices earlier this year may have also “spooked” potential buyers, warns Hogue.

Reduced demand and increased supply will lead to greater balance, Hogue believes. Home prices have yet to respond to healthier inventory levels, but he sees that changing.

“… if sustained, we would expect the pace of property appreciation to slow in the coming months,” he said. 

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  • Shane Macaulay 9 months ago

    ‘Reduced demand and increased supply will lead to greater balance, Hogue believes.’

    I truly appreciate all the experts describing how we are heading for a balanced market.
    I think of it this way. I take a baseball, and throw it as high as I can into the air (not as far nowadays 😒).
    Eventually, the ball stops rising, and returns to terra ferma.
    What are the chances the ball will gradually fall, or fall within my control? Zero.
    This is the classic “last one in is done”. Except the longterm issue is there are a large number of Canadians who are the “last ones”.
    Time will tell what happens next. But clearly the recession looming will nearly destroy the small and medium sized businesses dependent on consumers spending money on lattes and sneakers where those consumers have committed future earnings on today’s properties.
    And all as the interest rates are creeping higher.
    See you all on the other side.

  • Shane O Mac 9 months ago

    ‘Reduced demand and increased supply will lead to greater balance, Hogue believes.’

    I truly appreciate the experts describing the upcoming balanced market.
    I see it this way. I throw a baseball in the air (not as far nowadays 😒).
    It stops rising, and returns to terra ferma. What are the odds it returns gradually, or within my control? Zero.
    Only time will tell. But most of the small and medium sized businesses who are dependent on consumers supporting them will likely be toast when those consumers have already committed future earnings on today’s real estate purchase.
    As the interest rates are creeping higher to boot.
    See you all on the other side.

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