RBC’s latest economic report indicates that Canada’s housing market began to find a footing in May, showing initial signs of stabilizing after a period of uncertainty. This follows a broader de-escalation of trade tensions.
Key Highlights from May:
- Resales: Home resales increased for the second consecutive month, rising by 3.6% in May. This marked a stronger rebound compared to previous months. However, overall activity remained subdued in many local markets, particularly in Southern Ontario and British Columbia, where persistent affordability challenges and a softening job market continued to impact demand. Despite the monthly increase, national resales were still down 4.3% year-over-year.
- Supply: The supply of available properties continued to grow, with new listings rising by 3.1% in May. This brought the 12-month increase in listings to 8%, and the total housing inventory reached a six-year high. This abundance of supply has intensified competition among sellers.
- Prices: While prices generally declined, the rate of decline significantly slowed in May. The national composite MLS Home Price Index (HPI) saw a modest decrease of 0.2% from April, a much smaller drop compared to the average 0.9% decline observed in the preceding three months.
- Regional Variations:
- Ontario: This province played a significant role in moderating the national price decline. The Greater Toronto Area recorded its first monthly price gain in six months (0.1%). However, prices continued to fall in other Ontario cities like Hamilton, Windsor, Kingston, and Ottawa. Condo apartment prices generally showed weakness due to increasing inventory.
- British Columbia: The MLS HPI continued its decline in British Columbia.
- Alberta: There was a divergence in Alberta, with Calgary experiencing a 0.5% decrease while Edmonton saw a 0.2% increase.
- Other Provinces: Upward price trends were maintained in Saskatchewan, Quebec, and most of the Atlantic provinces.
Outlook:
RBC anticipates a gradual rebuilding of confidence in the housing market as uncertainties related to trade disputes continue to lessen, which is expected to broadly boost demand. However, the pace of recovery may be tempered in the near term by a weak job market. The existing supply-demand imbalances are expected to persist in Ontario and British Columbia, potentially leading to further price depreciation, especially in the condo segment where supply is particularly abundant. In contrast, markets with tighter supply-demand conditions, such as Edmonton, Regina, Saskatoon, Winnipeg, Montreal, Quebec City, Halifax, and St. John’s, are more likely to experience firmer price appreciation.