Home prices favour buyers in some Canadian markets, sellers in others: RBC

Home prices have fallen in Toronto and Vancouver, while Saskatchewan and Alberta remain strong markets.
Potential buyers are getting into the market as conditions have improved as prices have eased in some areas and concerns about the trade war have eased, according to an RBC economist. But some other cities in the country are still seeing strong markets and high prices.

Data from local real estate boards shows that home sales increased slightly between May and June in major markets such as Vancouver, Edmonton, Regina, Saskatoon, Toronto and Halifax. However, the growth has only partially offset previous declines.

“When you look at different metrics, buyers now have more negotiating power over prices,” said Robert Hogg, RBC’s chief economist.

The MLS home price index has declined in Toronto, Vancouver, southern Ontario and the lower reaches of British Columbia. In these areas, inventory is at historic lows and buyers are struggling to afford it.

“The markets in southern Ontario and British Columbia have been weak, but activity seems to have stabilized in recent months and is not down much,” Hogg says.

“Prices continue to decline in these markets because there are not many buyers who are struggling to afford it, and there is a lot of competition among sellers. So prices are coming down,” he adds.

Meanwhile, home values in most markets in the Prairies (Saskatchewan and Alberta), Quebec and the Atlantic region remain high, sustained by limited supply and strong demand.

“It’s a different story in other parts of the country,” Hogg continues. “We’ve seen some corrections in the spring due to the trade war, which has affected market confidence, but market activity in the Prairies and Montreal is still relatively strong compared to pre-pandemic levels.”

Buyers in Toronto have the opportunity and bargaining power
The Toronto region is seeing a high number of homes for sale, which is unprecedented in decades, which is a boon for buyers, allowing them to make more informed decisions and negotiate prices.

The Toronto MLS home price index fell 5.5 per cent in June from a year earlier ($58,000+) and was down 0.9 per cent from May. Condos were the biggest losers, down 8 per cent due to a large supply, but all types of homes saw some price declines.

Despite a modest improvement in affordability and easing concerns about the trade war attracting more buyers to the market, home sales rose 8.1 per cent in June from the previous month, the third consecutive increase. But Hogue says the market is still a long way from a full recovery, with activity still at cyclical lows and job concerns rising.

Sellers in Montreal market holding back
The Montreal market’s recovery has stalled this year in the wake of the trade war. RBC estimates that home sales fell about 2 per cent between May and June for the third straight month.

Sales, however, are still at levels that were considered healthy before the pandemic.

A drop in seller supply, as new listings fell 7 per cent from May to June, has added to the pressure on demand.

That has led to significant price increases for both single-family homes and condos; median prices rose 7.4 per cent and 6.6 per cent, respectively, last month from a year earlier.

Vancouver prices are falling sharply
The decline in home sales in Vancouver is stabilizing, but prices are still on a downward trend.

Vancouver’s MLS home price index fell 2.8 per cent from a year earlier in June, the fourth consecutive month of annual declines.

Buyers are in a strong position as supply is extremely high, with the number of active homes hitting a 13-year high in June. However, home sales rose more than 2 per cent in May for the first time this year.

Calgary prices softening
Calgary continues to see a price decline, with housing inventory rising. The MLS home price index fell in May and June, and has fallen 3.6 per cent in the most recent period.

But RBC doesn’t expect much of a decline in property values, as supply and demand are largely balanced.

Calgary is a market where supply and demand are relatively tight, and buyers’ affordability is somewhat limited. The city’s economy also remains relatively strong.

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