Toronto & Vancouver Are Now The Weakest Real Estate Markets In Canada

Canadian real estate seems boring these days, but dramatic demand shifts are occurring. Canadian Real Estate Association (CREA) data shows the sales to new listings ratio (SNLR) fell in September. At the national level, the drop was only slight but the composition shift was very unexpected. Booming cities like Calgary are now seeing the demand balance weaken at the fastest rate in the country, and cities where the primary employer is government are suddenly tightening. It’s Toronto and Vancouver that are producing the most surprising data though—typically the hottest markets in the country. Both cities are now struggling to find buyers, and now have the weakest demand in the country. 

Canadian Real Estate Demand Is Balanced Compared To Inventory

The SNLR is the industry’s measure used to determine the strength of market demand. A ratio between 40 and 60 percent is considered a balanced market, where inventory is right for the demand. Above 60 percent is a seller’s market, and experts believe prices will rise. Below 40 percent is considered a buyer’s market, when they believe prices will start falling.     

The national ratio is still slipping lower, not to mention getting close to a buyer’s market. Canada’s SNLR fell 0.2 points to 44.5% in September, on the lower side of a balanced market. Despite a national decline, 19 of the 26 (73%) major markets actually saw a boost to the SNLR. Bluntly put, just 7 markets saw such big drops they influenced data for the whole country. It didn’t help that two of the largest real estate markets are now the weakest.

Toronto & Vancouver Are Now Canada’s Weakest Real Estate Markets

The September sales to new listings ratio (SNLR) for Canada’s largest real estate markets in 2024 vs 2023. In percentage points.

Source: Better Dwelling; CREA. 

Toronto & Vancouver Are The Weakest Markets In Canada

Oh, how the mighty have fallen. Toronto and Vancouver, which both ranked amongst the largest real estate bubbles in the world, have the weakest demand across Canada. Greater Toronto’s SNLR of just 27.6% in September (-1 point) is now the lowest in Canada. Vancouver is now the second worst with an SNLR of 30.3%, down 4.7 points from last year. Despite this, neither of the bubble brothers have seen a significant price decline since 2022. Sellers are likely holding firm and hoping that lower rates will revive demand. It was believed both markets would get a bump from the mandated back-to-office designed to protect these markets, but it has yet to happen. 

The flight from these two pricey cities is very real. It’s also likely helping to boost demand in more affordable regions, as prime-aged workers flee after investors largely captured most new supply. 

Government Towns Have Seen A Big Boost In Demand

Not all Canadian real estate markets are doing Toronto and Vancouver-amounts of bad. In fact, some cities have seen a sudden surge, with demand outstripping new listings for sale. Quebec City had the biggest jump from last year—it climbed 17.9 points to 78.8% in September. In a distant second was Sudbury’s 12.8 point climb to a ratio of 69.9%, followed by Gatineau’s 10.1% climb to a ratio of 58.8%. A lot common in these markets, with similar population sizes and home prices. However, there’s a more interesting common factor—they’re all hubs for government employment. 

Various levels of government recently ordered employees back to the office for a minimum number of days. The idea was to bolster demand for large cites and revive stagnating downtowns that were abandoned with the work from home trend. While employees only have to commute a few days per week, that anchors them from moving too far outside of these regions. It would be surprising if this wasn’t a major influence on these regions, but we’ll dive further into that next week. 

Calgary Real Estate Remains Balanced Despite The Biggest SNLR Drop Across Canada

On the flip side, some cities that recently saw a major boost when rates climbed are suddenly loosening. The largest annual drop was surprisingly in Calgary, where the SNLR shed 20 points and fell to 55% in September. Dropping 20 points and still sitting on the upper end of the balanced scale highlights just how scarce inventory was in contrast to the demand in the past year.   

Following Calgary is Newfoundland, where the SNLR fell to 57.3% in September, 10.6 points lower than last year. Rounding out the top 3 was Fraser Valley, shedding 9.2 points to a 30.5% SNLR. The latter is the third worst-performing market, but not entirely surprising. The region neighbors Greater Vancouver and shares market conditions so similar agents are often dual-members.  

This fall’s real estate market may look similar to last year but a lot’s changed under the hood. Two of the country’s most prominent markets have seen demand disappear. Calgary’s sudden erosion is the biggest surprise, but likely welcomed by market participants who were facing overheated conditions. 

It’s common for market activity to cool into the fall. Few people are interested in seeing properties during the busy holiday, and sellers aren’t in love with people trekking through their living rooms during this time. However, this time is shaping up to be a little different—only buyers are stepping back. 

Sellers are still rushing into the market and the downward pressure on prices is building once again. Even more bizarre is the trend in cities like Toronto, where sellers are opting to default instead of cutting their prices. A very strong signal that many are too highly leveraged to accept small losses—they’re risking the whole kit and caboodle.