Canadian Housing Market Outlook
Data from the Canadian Real Estate Association (CREA) indicates that the average price of resale residential homes sold across Canada in August 2023 was $750,100, an increase of 1.0% compared to a year ago.
CREA also reported the national sales-to-listings ratio (SNLR) of 56%, slightly down from 64% in June, indicating a balanced market nationally.
Verbatim: What national experts from the Canadian Real Estate Association (CREA) say about Canada's national housing market:
“With sales slowing and new listings returning to more normal levels, demand and supply are continuing to come into better balance,” said Larry Cerqua, CREA Chair. “This is giving buyers more time and more choice. If you're looking for information and guidance about how to buy or sell a property this fall, contact a realtor in your area,” continued Cerqua.
“August was the first full month of housing data following the Bank of Canada's July rate hike, so a dip in activity was expected,” said Shaun Cathcart, CREA Senior Economist. “The demand is obviously still there, and it will be back, but as the housing affordability crisis re-emerges as a top policy issue, for now, the slowdown on the buyer side should help keep a lid on prices.”
The Canadian Housing Market Performance in August
The housing market across Canada has witnessed a multitude of shifts in August. Let's look at the latest trends in Quebec, Ontario, Alberta, British Columbia, and the Atlantic provinces.
Quebec: A Stable Market
In Quebec, the housing market remained stable. Despite a minor decrease in sales, the average price of residential properties witnessed a year-over-year increase.
According to recent data, the number of residential sales in Quebec slightly dipped compared to the same period in the previous year. However, the market saw an increase in new listings, providing more options for potential homebuyers.
Quebec City CMA witnessed 573 residential sales, marking an 8% rise compared to August 2022.
In Montreal, the housing market saw a rise in home sales by 4% compared to the same month the previous year. The Quebec Professional Association of Real Estate Brokers reported that sales in the region totalled 2,753 for the month, up from 2,652 a year ago. Prices remained close to their 2022 peak, with the median price of a single-family home at $561,000, up 7% from a year ago. The median condominium price was $393,000, up 2%, and the median plex price was $720,000, up 3% from a year ago. Active listings totalled 15,159, up 14% from 13,293 a year ago. However, new listings for the month fell 4% to 4,864 compared with 5,089 in the same month last year.
On the pricing front, the average home selling price experienced a modest increase. Despite the slight drop in sales, the stable prices depict the sustained demand in the Quebec housing market.
Ontario: A Mixed Bag
Ontario's housing market presented a mixed bag of results in August. While the average home prices increased, the resale market seemed to stall. However, Ontario's resale market hit a plateau amid higher interest rates and economic uncertainties.
The average selling price for a new home in Ontario increased in August compared to a year ago. This price hike was mainly seen in freehold-class properties, indicating a continued interest in this type of property.
Toronto's housing market experienced a decrease in home sales by 6% compared to the same month the previous year. Despite this, new listings increased by 16% year-over-year, bringing the sales-to-new-listings ratio (SNLR) to 43%, indicating a balanced market. The average selling price for all home types combined was up 17.4% to $1,070,911. The average price of detached homes in Toronto was $1,684,011, up 14.3% compared to August 2022. Condo apartments saw a year-over-year price increase of 8.4%, with an average price of $691,012. Despite the overall decrease in sales, the market remained active, with healthy price growth experienced throughout the region.
The local markets in the Toronto region are poised for substantial fluctuations this autumn. The market is recalibrating following much activity over the past few years. Purchasers now hold slightly more bargaining power, while vendors must ensure they competitively pitch their pricing strategy. However, given that inflation vastly exceeds the 2% objective and economic instability lurks on the horizon, it's plausible that the Bank of Canada may persist with rate increases to dampen demand.
For potential buyers, escalated rates equate to diminished buying capacity. Clients should engage in discussions with their mortgage lender to secure the best rate. The significant uncertainty lies in whether these escalating rates might trigger a surge of sellers under duress into Toronto's urban market this fall season. Up until now, homeownership remains prevalent across Toronto despite some owners witnessing mortgage expenses rocket up to 70% over recent months. However, should further interest rate hikes occur, this could alter dramatically.
Ottawa had 791 residential properties sold, a slight decrease of 0.3% from the previous year. The average price of a residential property was reported to be $561,000.
As we approach the autumn property market in Ottawa for the present year, projections indicate a resemblance with 2022's season in terms of unit sales. From September to December last year, there was an upward trajectory in rates that resulted in a downturn of 34.9% when compared to the 5-year average (from 2017 to 2022) of unit sales. In contrast, despite initially struggling during this year, there has been an observable bounce-back with a rise of 9% since May compared to similar months (May through August) from last year. This increased performance occurred despite constant escalations observed within interest rates. We are on track to achieve approximately 16,000 transactions, a slight increase from last year's tally at just over 1550 sales; moreover, prices have been on an upward trend since January.
The expectations on unit sales forecast numbers are akin to those witnessed during last year or slightly more elevated figures. To provide specifics: September saw movement of over 1000 units while October recorded less than 1000 but still a relatively high number at 1982 units sold; November reduced further with 846 transactions while December had 601 completed deals. For potential buyers looking at these statistics, it can be deduced that typically, September through November signifies less intense competition. They are categorized as having some of the lowest average sale price months ranked 6th through 8th, respectively, throughout any given calendar cycle. Typically, prices relax once summer concludes due to its seasonal nature and selling/buying activities being redirected toward back-to-school arrangements. Instead, the focus shifts away somewhat from real estate dealings, initiating gradual declines within pricing structures post-summer seasonality shift, which continue into holiday preparations, resulting in further cooling effects upon property prices.
Hamilton's average home price dropped by 5.7% compared to the previous month, settling at $798,786 for August 2023.
Mississauga's average home sold price decreased by 1.8% year-over-year to $1,057,232. Detached home average prices increased by 2.8 % year-over-year.
London's average home prices decreased by 1% over the past month to $668,821 for July 2023, which is 0.2% lower than July 2022.
Alberta: Record Sales Amid Low Inventory
Alberta's housing market saw record sales in August despite historic lows in inventory, indicating a strong demand for properties in the region.
Alberta witnessed record sales for residential properties in August. The number of sales was significantly higher than the same month in the previous year. This surge in sales indicates a robust demand for properties in Alberta.
Calgary's average home price decreased by 2.3% compared to June 2023. Calgary's number of sales saw an 18% yearly rise.
Although Calgary and its nearby regions are reasonably priced compared to other significant Canadian metropolises, the market circumstances significantly diverge from those a short drive north in Edmonton. Drawing on data from the 2023 Q2 Housing Market Report by the Calgary Real Estate Board, it's anticipated that Calgary's housing market will remain vibrant and dynamic throughout autumn 2023, marked by several prominent trends and potential obstacles. While sales activity has moderated after shattering prior records last year, it surpasses traditional norms.
Intriguingly, there is an intense desire for higher-priced properties in the marketplace. This trend may be propelled by an influx of residents moving inter-provincially from Ontario and British Columbia – they're drawn to Calgary's comparative cost-effectiveness despite rising lending rates. Moreover, the city's robust job market is fuelling demand across all property classifications. However, coping with this demand is proving difficult due to the limited housing supply, which pushes up property values in both second-hand and new home markets. Traditionally, as we transition into chillier months of the year, our sales activities usually dip.
Total residential unit sales in the Greater Edmonton real estate market for August 2023 hit 2,250, increasing 21.8% compared to August 2022.
A primary element enhancing Edmonton's allure is its underpriced real estate. The benchmark price in this city stands at a tempting $443,700, considerably lower than Calgary's towering $685,100. This makes Edmonton an enticing option for individuals considering relocation to Alberta. Moreover, the growing demand for oil creates additional job opportunities, boosting the market. Edmonton's condominium sector also shows promising signs of revival as vacancy rates drop and rents ascend.
As we look back on 2023, a crucial feature of Edmonton's property scene was the record low supply levels – the lowest seen in more than 10 years. This shortage has resulted in daily bidding wars as buyer demand consistently overtakes seller supply. Peering into what lies ahead in autumn's property market landscape, we predict continued population growth in Alberta and specifically within the Edmonton region will persistently squeeze already limited housing stock availability. Consequently, this could escalate prices further as potential buyers vie for scarce inventory options. Single-family dwellings priced between $400k – $600k are projected to stay popular due to their appeal amongst those seeking homes that balance affordability with desirability.
Despite the high sales, Alberta's property inventory hit historic lows. The limited availability of properties could contribute to increased competition among buyers, leading to higher sale prices.
British Columbia: Seasonal Slowdown
The British Columbia housing market experienced a seasonal slowdown in August. However, the prices of properties remained stable, indicating a balanced market. This seasonal slowdown is a typical trend in real estate markets influenced by holidays and changing weather conditions.
Total residential unit sales in the Greater Vancouver real estate market for August 2023 totalled 2,296, 13.8% below the 10-year seasonal average.
A critical factor influencing Vancouver's autumn market will be the lingering impact of heightened interest rates throughout 2022 and 2023. Many rental property owners in Vancouver are opting to offload their investments due to the sharp rise in interest rates, having hit critical thresholds, alongside provincial regulations restricting rental hikes to a mere 2% in 2022 and slightly higher at 3.5% come 2023. This volatile concoction has left numerous investors cornered and unwilling to continue underwriting their tenants – even with potential long-term capital growth.
Vancouver's property prices hover around or have reached an apex akin to those seen in March of 2022 despite consecutive years of increased interest rates. Buyers and sellers are not reacting irrationally or frantically; they're making moves for typical reasons such as job changes, weddings, separations or family matters. Many who had previously deferred relocation plans during the autumnal season of 2022 or springtime in '23 due to sluggish market conditions have now resolved to proceed. Looking ahead briefly, the prognosis for real estate within Vancouver appears steady, albeit uneventful, but indeed more promising this fall than that witnessed back in '22. The longer-term outlook consistently presents an optimistic picture, given constraints on available land and a temperate climate amidst sustained high demand.
Victoria's regional market this August saw 544 sales, a 13.8% increase from August 2022.
Despite the slowdown in sales, the prices of properties in British Columbia remained stable. This price stability suggests that the market is balanced, with a healthy ratio of buyers and sellers.
Atlantic Canada: Steady Growth
Atlantic Canada's housing market continued to show steady growth in August. The property prices in this region have been increasing consistently, reflecting a healthy real estate market.
The average selling price for properties in Atlantic Canada saw increases in August. This consistent price increase indicates a healthy demand for properties in the region due to the affordability and entry price point compared to Central or Western Canada.
Each of the 4 provinces saw a slight increase in their month-over-month composite price, with Prince Edward Island and Newfoundland having the highest monthly increase of 1.8%.
All the large Maritime cities experienced an increase in their August home price, with St.John's, Newfoundland, and Saint John, New Brunswick, seeing the highest regional increases of 1.6% month-over-month each.
In addition to increasing prices, the number of property sales in Atlantic Canada also showed a steady growth. This growth in sales further underscores the strong demand for properties in this region.
In conclusion, the Canadian housing market displayed varied trends across different provinces and regions in August. While some areas saw a slowdown in sales, others hit record highs. Despite these differences, the overall market remains resilient with steady price growth and robust demand. As Canada navigates through economic uncertainties and evolving interest rates, it will be interesting to observe the changes in the housing market in the coming months.
However, these projections assume that the economy can smoothly navigate the next 18 months without falling into a recession. Albeit this outcome is certainly possible, leading economic indicators continue to decline and are now at levels that would otherwise signal an upcoming economic downturn. If these indicators are accurate, inflationary pressures will likely subside more rapidly than anticipated. This would allow the Bank to reduce rates in early 2024.
Month-over-Month Market Expectations
| Month | National Composite Benchmark Price | Units Sold | New Listings | SNLR | Market |
|---|---|---|---|---|---|
| January | $612,799.00 | 33,100.00 | 62,793.00 | 52.71% | Balanced |
| February | $662,901.00 | 33,778.00 | 57,316.00 | 58.93% | Balanced |
| March | $686,276.00 | 34,369.00 | 53,929.00 | 63.73% | Sellers |
| April | $716,269.00 | 38,258.00 | 55,450.00 | 69.00% | Sellers |
| May | $729,044.00 | 40,220.00 | 59,237.00 | 67.90% | Sellers |
| June | $760,600.00 | 40,449.00 | 63,599.00 | 63.60% | Sellers |
| July | $757,300.00 | 40,028.00 | 67,615.00 | 59.20% | Balanced |
| August | $750,100.00 | 38,345.00 | 68,156.00 | 56.26% | Balanced |
The sales to new listings ratio (SNLR) is the number of home sales compared to new listings. An SNLR under 40% suggests a buyer's market where buyers have the upper hand and more negotiating power. An SNLR between 40% and 60% is a balanced market, while an SNLR of over 60% is considered a seller's market.
Market Breakdown - Change By Province
Provincial and territorial composite benchmark prices in order of decrease/increase compared to last year.
| Province / Territory | Composite Benchmark Price 2023 | Composite Benchmark Price 2022 | YoY Change (%) |
|---|---|---|---|
| British Columbia | $995,900.00 | $985,700.00 | 1.00% |
| Alberta | $485,000.00 | $465,400.00 | 4.20% |
| Saskatchewan | $327,800.00 | $329,300.00 | -0.50% |
| Manitoba | $358,167.00 | $344,237.00 | 4.00% |
| Ontario | $908,000.00 | $898,700.00 | 1.00% |
| Quebec | $471,800.00 | $466,100.00 | 1.20% |
| New Brunswick | $293,800.00 | $286,400.00 | 2.60% |
| Nova Scotia | $401,700.00 | $375,700.00 | 6.90% |
| Prince Edward Island | $367,400.00 | $367,300.00 | 0.00% |
| Newfoundland and Labrador | $295,100.00 | $285,900.00 | 3.20% |
| Yukon | $500,914.00 | $512,605.00 | -2.30% |
| Northwest Territories | $421,947.00 | $512,400.00 | -17.70% |
What Buyers - Sellers Can Expect in 2023
For much of 2023, the housing market is expected to remain a buyer's market. Homebuyers will have an edge, as experts predict that markets will be more buyer-friendly in 2023 than in previous years, with fewer buyers looking for properties and interest rates projected to elevate as we enter a possible recession.
Home sellers should also prepare themselves for the possibility of lowball offers from buyers who may want deeper discounts to qualify for prime mortgages. Despite elevated mortgage rates and a continuing shortage of homes for sale, the 2023 market has potential benefits for buyers and sellers.
Market Rents Summary
The Canadian rental market experienced a record-breaking surge in August, with average rents soaring to an all-time high. This trend indicates a significant shift in the country's rental landscape, with prices continuing to escalate despite increasing rental completions. Below, we delve into this trend with data from Rentals.ca and Urbanation, examining the changes across various provinces and cities.
National Overview: A Record-Breaking Surge
August witnessed a remarkable rise in the average asking rents in Canada. The average rent reached an all-time high of $2,117, marking a monthly increase of 1.8% and an impressive annual growth rate of 9.6%. This trend is a testament to the escalating demand in the rental market as the country struggles with a severe rental housing shortage.
Over the past three months, the Canadian rental market experienced a significant 5.1% increase in asking rents from May to August. This equates to an increase of $103 monthly, putting additional pressure on renters. Shaun Hildebrand, President of Urbanation, shed light on this trend, noting that unlike in the U.S., rent inflation in Canada has stayed the same, even with rental completions reaching their highest levels in decades. This gives an idea of the dire rental housing shortage across the country and the impact on rental demand as the population expands rapidly.
Quebec's Rental Market: Steady Climb
In Quebec, the rental market is also experiencing a steady rise. The province, known for its rich culture and picturesque landscapes, has seen average asking rents grow by 24.0% annually to $888 monthly for shared units. The surge in rental prices in Quebec is mainly attributed to the robust demand for rental housing, driven by the province's growing population and strong economy.
The Greater Montreal area, in particular, has seen a significant rent increase. Despite the city's efforts to provide affordable housing, the average asking rents have surpassed the $2,000 mark for the first time, reaching $2,001. This has increased financial strain on renters, particularly those with lower incomes.
Ontario's Rental Landscape: The Expensive Side of Living
Ontario, Canada's most populous province, is familiar with high living costs, particularly in the rental market. The province saw an annual rent increase of 7.5% to an average of $1,040 for shared accommodations. This trend is particularly prevalent in the Greater Toronto Area (GTA), where the average monthly rent has reached $2,898.
Despite being one of the country's most expensive cities, Toronto posted a below-average annual rent increase of 8.7%. Nevertheless, the cost of renting in Toronto remains high, while rental vacancies are at a two-decade low. This increasing unaffordability and low availability is a significant concern for many residents and employers looking to attract talent.
Alberta's Rental Market: Leading in Growth
Alberta's rental market has grown the fastest among Canada's largest cities. Calgary, in particular, leads in rent growth, recording an enormous 17.3% year-on-year increase in August, bringing the average rent to $2,068 for purpose-built and condominium apartments.
Despite the economic challenges faced by the province due to the fluctuating oil and gas industry, Alberta's rental market has remained resilient. The significant rent rise in Alberta is primarily due to the province's steady rental demand, driven by its growing population and recovering economy.
British Columbia's Rental Market: High Prices Amid High Mountains
British Columbia (BC), known for its stunning landscapes and high living costs, has also witnessed a considerable increase in rental prices. In BC, average asking rents for shared accommodations increased by 17.7% annually to $1,150 monthly.
Vancouver, BC's largest city, continues to be the most expensive city in Canada, with an average monthly rent of $3,316. However, Vancouver posted a below-average annual rent increase of 7.3% and even saw a 0.7% decrease in average rents monthly. This indicates that the city's rental market may be stabilizing, although the cost of renting remains high.
The Time to Purchase a Home is Now
In conclusion, the Canadian rental market has been experiencing an unprecedented price surge, with rents increasing faster than ever. This trend and the ongoing rental housing shortage have pressured renters nationwide.
Given these circumstances, it might be an opportune time to consider purchasing a home. Despite the high upfront costs, owning a home can offer long-term financial benefits and stability, especially in a market where rents are skyrocketing. Thus, starting planning and taking the necessary steps toward homeownership is vital. After all, a home is not just a place to live but also an investment for the future.
Rental Cost Escalation Due To Housing Affordability Constraints
This past month, CMHC released some quantified findings from their 2022 Rental Market Survey. Their experts indicated rental markets tightening in many urban centres and created two different measurements to show the lack of housing supply in the country. You can read the full report, while the data can be easily illustrated in two charts.
Each $100K in mortgage balance costs an average of $601.11 per month on nesto's lowest fixed 5-year rate at 5.64% and $641.25 per month on nesto's lowest variable 5-year rate at 5.95% . Rates used for calculation are those offered on insured purchases with less than a 20% downpayment on a 25-year amortization. Each 0.25% change in mortgage rates impacts the monthly payment by $15 to $17 on a 25-year amortization.
Rental Prices Compared to Other Canadian Cities
| CITY | Total | Bachelor | 1Bdr Average | 2Bdr Average | 3Bdr Average | Total YoY Change |
|---|---|---|---|---|---|---|
| Vancouver | $3,316.00 | $2,554.00 | $3,014.00 | $3,983.00 | $4,511.00 | 7.30% |
| Oakville | $3,007.00 | $1,799.00 | $2,512.00 | $3,383.00 | $3,152.00 | 23.10% |
| Toronto | $2,898.00 | $2,101.00 | $2,630.00 | $3,433.00 | $3,796.00 | 8.70% |
| Mississauga | $2,682.00 | $1,972.00 | $2,397.00 | $2,892.00 | $3,223.00 | 12.40% |
| Etobicoke | $2,631.00 | $1,844.00 | $2,262.00 | $2,943.00 | $3,144.00 | 8.70% |
| North York | $2,607.00 | $1,793.00 | $2,267.00 | $2,796.00 | $3,502.00 | 11.30% |
| Burlington | $2,576.00 | NA | $2,205.00 | $2,653.00 | $3,260.00 | 6.80% |
| Victoria | $2,362.00 | $1,735.00 | $2,104.00 | $2,851.00 | $3,000.00 | -1.60% |
| Ottawa | $2,226.00 | $1,686.00 | $2,063.00 | $2,535.00 | $2,789.00 | 11.90% |
| Kitchener | $2,185.00 | NA | $1,951.00 | $2,371.00 | $2,505.00 | 8.80% |
| Halifax | $2,124.00 | $1,625.00 | $1,909.00 | $2,200.00 | $2,933.00 | 7.90% |
| Hamilton | $2,090.00 | NA | $1,922.00 | $2,301.00 | $2,440.00 | 8.40% |
| Calgary | $2,068.00 | $1,463.00 | $1,810.00 | $2,278.00 | $2,686.00 | 17.30% |
| Oshawa | $2,066.00 | $1,544.00 | $1,872.00 | $2,196.00 | $2,463.00 | 5.40% |
| London | $2,015.00 | $1,452.00 | $1,811.00 | $2,138.00 | $2,649.00 | -0.50% |
| Montreal | $2,001.00 | $1,472.00 | $1,769.00 | $2,241.00 | $2,517.00 | 16.40% |
| Laval | $1,969.00 | NA | $1,597.00 | $2,010.00 | $2,622.00 | 16.30% |
| St. Catharines | $1,899.00 | $1,615.00 | $1,669.00 | $1,964.00 | $2,171.00 | 2.90% |
| Winnipeg | $1,465.00 | $874.00 | $1,229.00 | $1,645.00 | $2,164.00 | 8.30% |
| Edmonton | $1,438.00 | $957.00 | $1,312.00 | $1,621.00 | $1,674.00 | 13.90% |
| Quebec City | $1,393.00 | $985.00 | $1,255.00 | $1,573.00 | $1,768.00 | 12.50% |
| Fort McMurray | $1,296.00 | $1,053.00 | $1,163.00 | $1,352.00 | $1,616.00 | 2.90% |
| Lethbridge | $1,276.00 | $1,069.00 | $1,187.00 | $1,395.00 | $1,535.00 | 9.30% |
| Regina | $1,199.00 | $861.00 | $1,120.00 | $1,330.00 | $1,610.00 | 10.90% |
| Saskatoon | $1,143.00 | $919.00 | $1,051.00 | $1,225.00 | $1,416.00 | 3.70% |
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