After reaching sky-high levels at the start of the year, the Canadian housing market has slowed since spring, according to a report from RBC Economics.
The Canadian Housing Health Check provides RBC Economics’ assessment of key indicators of Canada’s housing market. Released on Tuesday, the report found that moderation in resale activity has eased the risk of an uncontrolled upward price spiral.
However, even after slowing, resales continue to be historically strong, the report said, and high demand due in part to tight supply means the odds of a price collapse are low.
“While easing since the spring, the sales-to-new listings ratio is still close to a record high nationwide. This tilts the scale decidedly in favour of sellers,” the report said.
With rock-bottom interest rates, soaring prices have created severe affordability issues in Vancouver and Toronto, with conditions worsening in Montreal.
The number of listings has lessened in Toronto, which has kept the market extremely tight and prices under intense upward pressure, the report said.
In Vancouver, the spike in activity since the spring has partly reversed but, according to the report, housing affordability remains “exceedingly poor and a major source of vulnerability.”
Conversely, the existing home market moderated to more sustainable levels in Montreal, but the report noted that sellers still have the upper hand.
Using RBC Economics’ housing risk affordability “dashboard” approach, Calgary continues to be the most affordable of Canada’s four largest markets. According to the report, the market has recovered solidly in the past year, inventories of existing and newly built homes are no longer excessive and prices are rising moderately.
RBC’s aggregate housing affordability measure increased since last summer (a rise represents a loss of affordability). The 52.0% reached in Q1 2021 was the worst level in 31 years.
Seasonally adjusted home sales totalled about 48,686 in July, down 3.5% from 50,459 in June and off 28% from their peak in March, the Canadian Real Estate Association said earlier this month.
The association found that the average price of a home sold reached $662,000 in July, up 15.6% from the same month last year. Excluding Toronto and Vancouver, the average price was $132,000 less, CREA said.