We’ve done a thorough industry review to explore the current trends and will delve deep into the major Canadian markets:
- General Commentary
- Toronto
- Vancouver
- Alberta – Calgary & Edmonton
1. General Commentary
Rate cut expectations pushed to July despite weak data
In February, Canada’s GDP increased by 0.2% MoM, falling short of the expected 0.4% rise. Preliminary data for March suggests stagnant growth, potentially resulting in a sixth consecutive quarterly decline and a 2% annual decrease in per capita GDP, while the US has experienced seven consecutive expansions.
Consumer sentiment dropped in April, as both the Conference Board and Bloomberg Nanos indices indicated concerning drops. Despite this, optimism in the real estate market remains high, suggesting a disconnect between personal finances and housing market expectations, possibly due to prolonged low sales prompting a rebound despite economic softening.
Additionally, we found out that business insolvencies rose by 81% compared to the previous year in the first quarter, especially impacting sectors sensitive to changes in interest rates.
Despite these developments, the probability of a rate cut in June has decreased to 35%, down from 80% just eight weeks ago, while there is a 90% likelihood of a cut in July. For now, we must remain patient and tolerate these elevated rates for a bit longer.
2. Toronto
Major Inventory Building
Sales – Declining
In April, seasonally adjusted home sales in the Greater Toronto Area (GTA) dropped by 3.4% compared to March, with downward revisions also affecting the preceding five months. This marks a 17% decline in sales over the last three months, the most significant decrease since mid-2022.
New Listings – Increasing
Toronto witnessed a 5.9% MoM surge in seasonally adjusted new listings, with revisions lifting previous months, resulting in a 49% YoY increase compared to April last year. Despite this rise, listings remain slightly below typical levels over the past year. With a strong tendency to revert to the mean, new listings are anticipated to remain high throughout the summer and possibly beyond. The sales-to-new listings ratio declined to 42% in April, historically signaling price decreases, suggesting prices may start to decline before summer if this trend persists.
Inventory – Increasing
Active listings experienced a remarkable 45% increase in just one month, marking the highest growth rate for any April since the implementation of the foreign buyer tax in 2017, resulting in an increase of 75% of active inventory compared to last year.
Condo Concerns
April saw a record number of both new and active condo listings, indicating a significant shift where sellers outnumber buyers. Condo rental listings surged by 51% YoY in Q1, surpassing leasing activity, and leading to the highest number of condos listed for rent since the COVID lockdowns. Rents are declining across all segments, further impacting the economics of condo purchases.
Prices – Increasing
The seasonally adjusted MLS HPI recorded its most substantial monthly increase since the middle of last year, posting a gain of 0.4%. However, this uptick reflects market conditions from earlier in the year when the sales-to-new listings ratio was relatively low, suggesting that unless significant tightening occurs, prices are expected to revert to negative growth within the next two months.
Construction – Declining
In March, the number of dwellings under construction in Toronto declined by 1.3%, primarily due to a surge in completions in the condo and rental segments, resulting in a total of 104,000 dwellings under construction, lower than the peak of 109,000 in 2023.
Housing starts are expected to decelerate significantly in the upcoming months, especially with new condo sales plummeting by 37% YoY in March suggesting a substantial slowdown in new building activity over the next year based on the typical relationship between preconstruction sales and condo starts.
While a future shortage of units may emerge, particularly in 2026 or 2027, the more immediate concern lies within the single-family segment, where starts have now declined to levels akin to those observed during the COVID lockdowns, indicating an impending supply crisis that is gradually unfolding.
3. Vancouver
Home Sales & New Listings Increase
Sales – Increasing
Sales increased by just over 3% compared to last year, with single-family sales rising by more than 6%. While demand is still below average levels, it’s not as weak as in Toronto, with both condo and single-family sales slightly below typical levels for the past ten years in April.
New Listings – Increasing
Initial assessments indicate a significant 30% MoM surge in new listings in April, reaching the highest levels since early 2022. The unadjusted figures confirm a notable 64% increase compared to the previous year. Similar to Toronto, the sales-to-new listings ratio dropped to the low 40% range.
Inventory – Increasing
In April, active listings experienced an 18% MoM surge, marking the most robust increase for the month since at least 2007, resulting in inventory being 42% higher compared to the same time last year. Notably, the condo segment witnessed a particularly significant inventory build, although both segments are generally within expected levels for this time of year.
Prices – Decreasing
The seasonally adjusted MLS HPI dropped 0.2% MoM in April, but were still 2.8% higher than last year.
Construction – High in condos, drop in single-family
In March, the total number of dwellings under construction in Vancouver increased by 2.7%, driven by a 3% rise in condo activity and a 2.9% MoM month increase in rentals.
However, the single-family segment saw a 3% decline in dwellings under construction, with 15% fewer homes being constructed compared to Q3 of the previous year, indicating a worsening supply shortage. Single-family housing starts in Vancouver plummeted by 32% YoY in March, with building permits suggesting a further decrease in the near future.
4. Alberta – Calgary & Edmonton
Markets Remains Hot
Sales – Demand decreasing but market balance tightens
Indications suggest that Edmonton is gearing up for significant growth, possibly surpassing Calgary as the best performing top-10 performing metro in the country: in Calgary, seasonally adjusted home sales decreased by 2.1% MoM whereas in Edmonton, they increased by 3.0%.
The YoY trend is remarkable: while sales in Calgary rose by a respectable 7%, they surged by an impressive 54% in Edmonton.
New Listings – Increasing
New listings increased by around 12% YoY in both cities. The sales-to-new listings ratio dropped to 90% in Calgary but climbed to over 80% in Edmonton, marking the second-highest level since 2006. Both markets are experiencing tight conditions, with Calgary already reflecting it in prices, while Edmonton is beginning to witness increased price movement.
Inventory – Decreasing
The lack of resale inventory continues in both cities but the YoY decline in now larger in Edmonton.
Prices – Increasing
Prices continue to surge higher in both Calgary (+10% YoY) and Edmonton (+8 YoY).
Construction – Rises in Calgary, Declines in Edmonton
Homeowner dwellings under construction declined 0.5% MoM in Edmonton where it remains near 20-year lows, while in Calgary it rose 2.4% in March and remains near all-time highs.
Look out for our next Seasonal Deep Review to see how markets are progressing across the country, as well as the impact to our markets if we do experience a mid-summer rate drop.
