Canadian real estate didn’t get a boost from a recent rate cut. That’s good news, according to BMO’s latest research note. The bank broke down CREA’s June update on existing home sales, and believes this is what the Bank of Canada (BoC) would like to see. Cheaper credit didn’t suddenly spark exuberant demand, potentially clearing the way for more rate cuts. However, BMO warns the data is driven by just one major factor—people fleeing the country’s largest markets, Toronto and Vancouver. This same trend is also helping to boost prices in traditionally affordable regions, creating a split market driven by the same issue.
Canadian Real Estate Prices Slip Lower, But Haven’t Moved Much
Canadian real estate prices moved slightly lower last month. The unadjusted benchmark price of a typical home fell 0.1% (-$800) to $733,300 in June. This represents a 3.1% (-$23,300) decline compared to the same month last year. Not much of a move by either measure, but not what sellers were hoping to see. The industry anticipated activity would pick up post-Bank of Canada (BoC) rate cut, but only sellers got that memo.
“All told, the resale housing market was subdued across much of the country in June, with little major response to the initial rate cut of this cycle,” explains Rob Kavcic, senior economist at BMO.
He adds, “For the Bank of Canada, this will be considered good news as the market is not standing in the way of further easing at this point.”
Canadian Home Sales Are Unusually Weak Despite Rate Cuts
If no price growth is good news for the BoC, slow home sales are about to make their year. Only 45.6k homes sold in June, a whopping 9.4% lower than a year ago. As stated, it’s a big surprise to many sellers and the industry that hoped rate cuts would drive mortgage borrowing. However, cheaper leverage was already available, preventing any real change to available leverage.
Overnight rate cuts were so highly anticipated, bond markets already reflected the easing months ago. “Simply put, with fixed mortgage rates already well below variable, and very few borrowers using variable-rate products, these early rate cuts aren’t having a big impact,” Kavcic explains.
Canadian Real Estate Sellers Are Trying To Move A Lot of Inventory
Clearly disappointing to sellers who planned to list into a wave of new buyers. There were 87.7k new listings in June, about 2.6% more than last year. Fewer sales and more new listings helped to push the sales to new listings ratio (SNLR) down to 52%, a decline of 7.1 points over the same period. Demand is now smack in the middle of a balanced market.
“In some markets, the outstanding inventory of homes for sale has rarely been higher and, while location/
type matters a lot, it’s fair to say that a gradual building of resale inventory continues. The months’ supply of homes for sale sat at 4.2 [months] in June, or just off the highest in four years,” says Kavcic.
People Are Fleeing Toronto & Vancouver, Skewing All Markets
Canadian real estate demand is balanced at the national level, meaning price, sales, and inventory are all in harmony at this current time. Balance at the national level can mean a lot of things at a more local level, and it’s not always ideal. In this case, some markets are seeing demand overheat, driven by flight from more expensive markets where demand is now ice cold.
Kavcic found that buyers are looking for more affordable regions, while traditionally hot markets are filling with sellers. “…there are clear disparities in market conditions across the country and by segment,” he says.
The Prairies were left out of the low-rate boom that started in 2020, but they’re catching up fast. BMO notes that Calgary is now the strongest market in Canada, with an SNLR of 79%, launching annual price growth 8.7% higher. Similar trends are beginning to emerge in cities like Edmonton, Regina, and Winnipeg—all of which are seeing positive annual price growth.
Similar strength was also observed in parts of Atlantic Canada and Quebec. “In most cases, this is a reflection of where Canadians can find affordability and, as a result, where they are moving,” says Kavcic.
“On the other end of that trade lies Vancouver and Toronto—that is, unaffordable markets that are witnessing people leave.”
Despite a population boom, both regions have seen a significant decline in sales. Both markets also saw valuations stretch prior to rate cuts in 2020, only experiencing minor bumps in contrast to surrounding markets. Rather than stretching their budgets, young adults and immigrants are now exploring greener pastures.
LOL. Going to be pretty awkward when people are paying the same price to live in Toronto as rural New Brunswick.
I can’t with the people Toronto coming to Halifax. We call them Torontards.
I don’t care what the real estate agent told you, that house you just bought for $1 million struggled to get buyers to pay $350k in 2019. And if you need to sell it back to the local market, no one’s paying that much ever.
Who audits the real industry’s indexing data because it’s bonkers.
HAHA. We have that problem in Calgary right now. Like welcome to Calgary but do you know anything about energy? Do you have a local business? Okay, well you’re going to have a bad time if your internet jobs doesn’t work out.
Calgary unemployment rate is much higher than Canadian average. I always thought it was because O&G is boom and bust, so there’s more frequent bouts of unemployment.
Would be interesting to find out this is related to people with savings moving from big cities and not having a job a few months later. Big cities exporting unemployment would be a new one! HAHAHA.
You are right about that as most selling out of Toronto and Vancouver are unemployed when they get here and some by choice as we cashed out at record high prices and retired to Alberta. Selling my home 2 yrs ago in Vancouver area bought me a nice place to live and 5 rental properties all cash flowing as they are clear title. I am not alone in that regard as many more are coming. Do you think I care if the prices go down a bit while I collect the high rents brought about by the hoards of migrants moving here? The ROI on rental properties can be phenominal in Alberta as there are zero rent controls here.
if money is what matters to you enjoy your Calgary. hahaha
In Vancouver and went to Toronto for about a month for work few weeks ago. I don’t know what happened to that place.
Like Vancouver is expensive (more expensive than Toronto), but all of the restaraunts are packed every day. I don’t what people’s budgets look like, but they’re at least spending and it’s busy.
In Toronto it *might* be busy if there’s an event or it’s the weekend, but that’s about it. Also constant traffic but I don’t think it’s more people. In Vancouver we built our cycling infrastructure so there’s two lanes and a bike lane on major streets.
The dolts in your city just eliminated one lane of traffic, so those clowns are now trying to ram the same traffic through a single lane. Of course it’s going to get backed up. Exiting the Gardener into a single street is the equivalent of putting parking and traffic lights on the highway. Comically bad management. Hire planners from other countries, we did that in Van and it’s been great.
Dude, I’m born and raised in Vancouver and in my 40 years I’ve seen people spend like crazy around here when they have nothing. Racked up credit card debit just to go out, buy expensive clothes and lease a car they can’t really afford. We use to call them $50k millionires.
Vancouver is a shithole
It’s not by accident… It’s an agenda. Reducing the number of available lanes for cars is one of them. It’s obviously blowing up big time and making the “planners” look like complete buffoons, but that’s what being a useful idiot entails. Some call them “politicians”, I call them useful idiots. You destroy your locality for a paycheck because your owners in the city of london and switzerland gave you self destructing policies to enact. olivia chow is literally in charge of nothing as mayor, she’s just a puppet figure head to scapegoat, even policies aren’t constructed by her or her team.
Keep “voting” harder, that’ll change things!
UN agenda 2030 outlines this, they aren’t hiding it. Implementing bike lanes almost everywhere across urban cities is the ultimate goal of 15 minute cities.
There’s no way Canada’s population numbers are right. How many people with “papers” just touchdown and leave?
Politicians were pushing so hard for a rental tower (against non-existent opposition to it), and it’s had an “available for rent” sign up since 2021, right across from the subway line. For shits I asked how much, and they responded with a list of vacant units, not just a couple.
Part of the problem might that the people who need to rent can’t afford to spend 70% of their income on it. The economics of shelter in this country are well and truly fucked right now.
Trudeau’s answer is more immigration and more unemployment for new arrivals. For these people, unaffordable housing is ubiquitous across the Country. Unfortunately, for the average or for all Canadians, the planning that has gone into this boodle is an Ouija Board.
Vancouver is a money laundry’s paradise, and Toronto is a Canadian NYC with an abysmal job market and a very abysmal dating scene. As my Caribbean friend would tell me, Toronto will make a man ‘run mad’.
Just imagine paying $2,000 and more for a studio prison apartment, and having to deal with the nonsense in Toronto. It’s infested with a certain social justice movement that is against men.
NO BRAINER. NEW USA HOUSES COST
LESS THAN 400K IN MANY SOUTHERN STATES
LIVE THERE HALF THE YEAR AND TRAVEL OR STAY WITH FAMILY/ FRIENDS WHEN IN CANADA
Toronto is a crap hole
The government needs to do something to support these house prices in these cities. You CANNOT allow the prices to drop for the sake of this country.
I have faith that Trudeau will step in and backstop these prices and guarantee they will not go lower.
It’s interesting to see how the BoC’s rate cuts haven’t spurred the expected rise in home sales, indicating a shift in buyer behavior and priorities. The focus on affordability is driving Canadians to reconsider their options, leading to stronger markets in places like Calgary and Atlantic Canada.
As a real estate professional at https://www.vancouverhomesearch.com/, it’s crucial to understand these shifting patterns and advise clients accordingly.
Geoff is a real estate agent or investor that is stretched to the max and is asking the government for a bailout to maintain current pricing? the government has no money only debt thanks to Trudeau and Freeland , Who’s going to pay the piper when this sad tune is over? The same hand going deeper into the same pocket ( taxes) has now hit bottom , don’t forget to vote , it’s your only voice.
Inflation information—> false or misleading Reason for slow home sales—>>Insanely OVER PRICED