Toronto Is The Second Coldest Market In Canada, As The Country Goes House Horny

Canada’s overheated real estate markets are showing some signs of cooling, but it’s still very tight. Canadian Real Estate Association (CREA) data shows the seasonally adjusted sales to new listings ratio fell in October. The ratio, which shows how much demand exists relative to new inventory, has been unusually high during the pandemic. However, it’s begun to fall across the country, with some of the biggest markets leading lower.

Sales To New Listings (SNLR)

One method for determining how “hot” a market is, is the sales to new listings ratio (SNLR). This ratio is exactly what it sounds like – the number of homes sold, compared to the number of new listings for sale. By measuring this, the industry can gauge how quickly inventory is growing. The measurements are also one of the ways the industry determines terms you’re probably more familiar with – a seller’s, buyer’s, and balanced market.

The way you use the ratio is fairly straight-forward. When the ratio is between 40 and 60 percent, the market is “balanced.” This is when the market is priced correctly for demand. When the ratio is above 60 percent, it’s a seller’s market. This is when prices are expected to rise. If it’s below 40 percent, it’s a buyer’s market. This is when prices are expected to fall. These are just guidelines, and there’s a few exceptions.

One notable exception is when the SNLR is fast moving. If it’s rising quickly, the market may act like a seller’s market, even in balanced territory. Fast falling ratios can see falling prices too, even if it’s technically a seller’s market. In short, the SNLR should be your starting point for understanding a local market. Not your comprehensive indicators.  

Quebec and Southern Ontario Real Estate Markets Are Tightest

Major markets with the highest ratios are in Quebec and Southern Ontario. Quebec City had an SNLR of 92.3% in October, up a seasonally adjusted 0.2% from a month before. Hamilton was in second with a ratio of 88.8%, down 10.5% from the month before. The Niagara region comes in third with an SNLR of 88.7%, up 5.1% from the month before. All of these markets are almost selling as much inventory as they’re receiving.

Sales To New Listings Ratio

The seasonally adjusted sales to new listings ratio in selected Canadian residential real estate markets.
Source: CREA, Better Dwelling.

Toronto Real Estate Amongst The 3 Coolest Major Markets

The lowest ratios are in the largest market in the country, surrounded by two Western Canadian cities. Edmonton has lowest SNLR for a major market at 57.3% in October, up a seasonally adjusted 0.2% from the month before. Greater Toronto is in second with an SNLR of 59.9%, down 5.6% from the month before. Saskatoon came in third with a 62.9% SNLR, up 3.7% from the month before. Only two of these markets are actually balanced.

Montreal, Small Cities Amongst Fastest Heating Markets

The major real estate markets with the fastest rising indicators are in smaller cities, and a large city that missed the previous rally. Niagara region is the fastest growing at 88.7% in October, up 5.1% from the month before. Saskatoon is the second fastest at 62.9%, up 3.7% from last year. Montreal comes in third with a ratio of 81.9%, up 3.4% from last year. Two of those markets are much deeper into a seller’s market than one of them.

Sales To New Listings Ratio Change

The percent change in the seasonally sales to new listings ratio for selected Canadian residential real estate markets.
Source: CREA, Better Dwelling.

Southern Ontario Real Estate Markets Are Cooling The Fastest

Real estate markets with the fastest falling ratios are clustered in Southern Ontario. Ottawa is the fastest falling with a ratio of 77.4%, down 11.9% from the month before. Hamilton came in third with a SNLR of 88.8%, down 10.5% from a month before. London came in third with a ratio of 84.9%, down 9.6% from a month before. Two notable markets didn’t make either list.

Toronto and Vancouver Real Estate Are Cooling Quickly As Well

Toronto and Vancouver weren’t in the top three of either indicator, but landed closer to the bottom. Toronto’s ratio, as stated earlier, was 59.9%, down 5.6% lower than a month before. That makes it the 5th fastest cooling market. Greater Vancouver real estate had a ratio of 63.1%, down 8.2% from a month before. That makes it the fourth fastest cooling real estate market. 

Most of the country’s major real estate markets are still seeing tight conditions. However, there is some indication pent up demand is catching up. Toronto and Vancouver are beginning to look sufficiently supplied for demand. The strongest declines in SNLR are also much larger than the strongest increases. This precedes stronger inventory growth expected next year, as the economy recovers. 

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8 Comments

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  • GTA Landlord 3 years ago

    Now do the City of Toronto. SNLR is 44%. Condos are 30%.

    • Ian Brown 3 years ago

      What I want to really see is a chart of maintenance fees. I keep hearing they’re turning monster in Toronto.

      • Ottawa Resident 3 years ago

        Ottawa too. Blaming it on insurance.

  • Kyle 3 years ago

    A lot of regrets are coming up for people treating the pandemic like the new normal. The second cities reopen, the rural premium will disappear.

    • Ethan Wu 3 years ago

      To some degree, there will be a new normal. My company finally saw the opportunity to grow the workforce without being bound to real estate, and we’re saving hundreds of thousands on lease payments when our existing leases come up for renewal.

      You can live where you want, but WFH has been accelerated by decades. I do agree some rural places might see a pullback, but the trend of de-densification is going to happen.

      • SH 3 years ago

        WFH has been accelerated by “decades”? Bit of an overstatement. Accelerated by 5 years, sure.

        I agree there will be a new normal but very few people will WFH every day on a permanent basis once Covid is over. However there will be MANY office workers for whom the new normal will be in-office 1-2 days and at home the remainder of the week. This opens up so many more housing options for people in Toronto and Vancouver. Areas that were too far to live when forced to go into the office 5 days a week become absolutely doable when only forced to do so 1-2 days.

      • Mike 3 years ago

        I live 40 km outside of KW and boom times have commenced for new subdivisions. With that, new amenities are coming to town (grocery stores, chain restaurants etc).
        I’m not sure the WFH anywhere will have legs long term permanently except for a few companies, but the extended range suburban/country towns commuters is definitely not going away.
        For instance, Manulife and great west life seem to still want there employees to come in a couple days a week in most cases. Also most tech companies rely on “brain storm” and creative sessions together by several people for great ideas.
        As for some places 200+ km that have rocketed 30%+ growth in value based on pandemic alone…. Unless retired people absolutely love being there year round (including winter), I just dont see value increase keeping up with cities/suburban areas long term.

  • C.D.R. 3 years ago

    IMO the demand for condos (especially shoebox units <500 Sq Ft) has dramatically diminished as condo boards will enforce the city's (TO) STR rules due to added risks & costs from COVID-19 and any future pathogen; owners/LTR tenants wanting more space for partial WFH (3-4 days/wk); reduction(25%) in rents/prices; sharp increases in building insurance thus increasing maintenance fees.

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