Toronto and Vancouver housing markets face steepest decline in 50 years, RBC says


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The impact of rising interest rates on Canadian housing markets became even more evident last week, as reports from local real estate boards revealed the slowdown was deepening from coast to coast. ‘other.

“Prices are falling rapidly and the exuberance that permeated these markets earlier this year is being replaced by fear,” RBC deputy chief economist Robert Hogue wrote in a recent note.

“In the Toronto and Vancouver areas, the decline in activity is quickly becoming one of the deepest in the past half-century.”

Along with the housing decline taken at the start of the COVID-19 lockdown, home sales in Toronto fell at the slowest pace in 13 years, Hogue said.

Meanwhile, inventories are climbing rapidly, up 58% from a year ago, and buyers are now managing to extract “significant price concessions” from sellers, he said.

Since March, the MLS Composite Home Price Index has lost $178,000, or 13%, to $1.16 million. In July alone, prices fell by 3.9% or $47,000.

Toronto isn’t yet a buyer’s market, according to the sales-to-new listings ratio, but RBC expects home hunters in the GTA to continue to find better deals, especially in the 905 areas ahead. outside downtown where prices have soared during the pandemic.

Vancouver, where home sales have fallen 40% over the past four months, is also experiencing a severe cold snap. July saw an estimated decline of 9%.

Home prices have fallen 4.5% since April to more than $57,000, but RBC thinks the correction is still in its infancy.

She expects prices to come down more quickly in the coming months, especially in the single-family home sector.

The blow to Canada’s two most expensive cities was predictable, but signs of a correction are now also appearing in more affordable cities.

“The slowdown may be more contained in other markets, but error-free nonetheless,” Hogue wrote.

Montreal home sales this year have slowed gradually and by July had fallen 17% below pre-pandemic levels. That and an increase in inventory brought the market back into balance, Hogue said.

Previously, this had only slowed price growth, but July could be a turning point, with prices for single-family homes and condos actually down.

“This development has been happening across the region, suggesting that an advisory-based price correction may be underway,” Hogue said.

Even in Calgary, the star of real estate this year, there are signs that the market is weakening. Home sales remain at historically high levels, but have calmed down since the buying frenzy seen at the start of the year.

Higher interest rates are pushing buyers toward more affordable options, like condos, and demand for more expensive single-family homes is falling.

Calgary’s MLS HPI composite peaked in May and has been sliding lower since, he said.

A rapid rise in interest rates is the reason for the international correction and with rates set to rise further (RBC forecasts another base of 75 by the fall), it will only get worse.

“We expect the downturn to deepen and spread further as buyers adopt a wait-and-see approach while checking the impact of higher lending rates,” Hogue said.


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Today’s Posthaste was written by Pamela Heaven (@pamheaven), with additional reporting from The Canadian Press, Thomson Reuters and Bloomberg.

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