Prospective homebuyers can make their way into the market, as trade war uncertainty begins to ease with prices slumping in certain areas, however some cities across the country remain robust with strong prices, according to an RBC economist.
Local real estate board statistics show transactions increased modestly between May and June in several major markets, including Vancouver, Edmonton, Regina, Saskatoon, Toronto and Halifax. However, the gains only represent a fraction of pullbacks earlier this year.
“When you look at various metrics, you know buyers now have much more of a stronger hand when negotiating prices,” said Robert Hogue, assistant chief economist for RBC.
The MLS Home Price Index (HPI) fell in Toronto, Vancouver, southern Ontario and lower mainland markets. These are markets in the country where inventory has risen to historically high levels, and buyers face stretched affordability conditions.
“Markets in southern Ontario, as well as B.C., are soft., however it looks like, over the last couple of months, the slide in activity, appears to be now stabilizing, so things don’t look like they’re getting any softer from an activity perspective,” said Hogue.
“But prices continue to fall in those markets. That’s likely because of a stretch of affordability that’s holding back a lot of buyers that can’t really get up prices in the current context, and the fact that those markets are really heavily in favour of buyers. At this point, there’s a lot of competition between sellers and less between buyers, so those markets are seeing price declines.”
Meanwhile, property values continue to be higher in most markets in the Prairies, Quebec and the Atlantic region, supported by still tight (and, in some cases, very tight) supply-demand conditions.
“Other parts of the country, the situation is different,” said Hogue. “We’ve seen some correction during the spring in the face of the trade war, that really affected confidence across the board. But the level of activity in most cases, I’m thinking in particular in the prairies, either in Saskatchewan or in Alberta, to a fair extent, not everywhere, but to a fair extent, the level of activity is still pretty robust. When you compare it to pre-pandemic levels, sort of same situation in markets like Montreal, for example. Now we’ve seen a bit of a slowdown lately, but nonetheless, the level is still, I would argue, compares pretty well relative to pre-pandemic level.”
Buyers in Toronto have time and bargaining power
The Toronto area is experiencing an abundance of homebuying options not seen in decades as the number of homes for sale continues to surge. The trend favours buyers giving them more time to make decisions and power in negotiating prices.
Toronto’s MLS HPI in June was down 5.5 per cent (or more than $58,000) year over yearand lower by 0.9 per cent from May. Condo apartments recorded the biggest decline at eight per cent due to plentiful supply, but all housing types lost some value.
Despite slightly improving affordability and easing trade war fears attracting more buyers to the market in June, home resales picked up 8.1 per cent from May, marking a third consecutive monthly increase. However, Hogue said recovery has a long way to go. Activity remains sluggish near cyclical lows amid growing job concerns.
Sellers hold back in stalled Montreal market
Montreal’s recovery has stalled this year in the face of the trade war, according to RBC. The bank estimates resales slipped for a third straight month between May and June, falling approximately two per cent.
However, resales are holding up at what would have been considered solid levels before the pandemic.
The bank says June’s modest pullback may have more to do with fewer sellers entering the market than buyers shying away. New listings fell by seven per cent from May to June,which has tightened the demand dynamic further.
This has maintained price pressure on both single-family homes and condos sustaining solid appreciation last month with median prices up 7.4 per cent and 6.6 per cent from a year ago.
Prices firmly on a downtrend in Vancouver
The slide in resales in Vancouver is stabilizing though prices remain firmly on a down track.
Vancouver’s MLS HPI declined 2.8 per cent from a year ago, marking the fourth straight month of annual declines.
Buyers are in the driver’s seat with supply-demand conditions heavily favouring them amid mounting inventories. Active listings reached a 13-year high in June, yet home resales rose for the first time this year, up more than two percent in May.
Calgary experiences a soft landing
Calgary continues to cool as inventory rises and prices soften. The city’s MLS HPI fell in May and June, down 3.6 per cent in the latest period, though the bank sees limited downside for property values given aligned supply and demand conditions.
Calgary is a market where supply and demand are largely aligned, and affordability is only mildly strained. The city is also supported by a relatively robust economy.
