Spring Housing Market Slump:
Buyers in a Favorable Position
The Canadian real estate market typically picks up in spring, peaking in late April and early May. However, this year the market remains sluggish, awaiting economic recovery. Expected interest rate cuts in June could stimulate the market.
According to the latest data from the Canadian Real Estate Association (CREA), April sales were down 1.7% compared to the previous month. Monthly home sales have been below the 10-year average since early 2022, when the Bank of Canada began raising rates.
The decline in sales coincided with an increase in listings. CREA reported a nearly 3% increase in new listings across Canada. In Toronto, new listings in April rose 47.2% compared to the same month last year.
With the increase in properties for sale and slowing sales, buyers are now in a favorable position. This market imbalance allows buyers to negotiate more effectively and forces sellers to lower their expectations.
Compared to April 2023, sales last month were up 10.1%. Home transactions have been on the rise since early 2023, despite some fluctuations. This suggests a possible recovery if interest rates remain favorable.
CREA’s benchmark price remained flat month-over-month in April and decreased by 0.6% compared to last year. Most real estate markets in the Maritimes showed price increases. In Moncton, prices rose 12.2%, and in Halifax, they increased by 4.3%. In Quebec, benchmark prices rose 3.3% in Montreal and 7.2% in Quebec City. In Calgary, benchmark prices increased by nearly 10%, and in Edmonton, they rose by 5.6%.
The Greater Toronto housing market continues to show weakness, with April prices slightly lower than last year. In Vancouver, prices rose by 2.7% year-over-year. High prices in Toronto mean that market growth depends on a reduction in mortgage rates.
Real estate markets vary by location and property type, with significant differences even within local markets. In Toronto, the market is divided between the city (416) and the suburbs (905). Condo sales in central Toronto fell 9.5%, while suburban condo sales declined by 0.4%. Sales of detached houses in the suburbs fell by 9%.
John Asher, co-founder of a Toronto-based real estate platform, sees tough times for the condo market in Toronto. He notes falling sales and rising listings, describing Toronto as a "buyers' market." He also highlights the increase in canceled listings, indicating seller frustration.
Investment properties are more vulnerable in a high interest rate environment. When rental income does not cover costs, investing in condos becomes less attractive. Thus, April condo sales in Toronto were the lowest since 2017, excluding 2020 when the market was partially shut down due to the pandemic.
The housing market could recover this summer with favorable interest rate policies and a timely reduction in mortgage rates.