In a comprehensive report, it has been revealed that the national housing market in Canada experienced a slowdown in August, marked by a decline in both sales and prices compared to July. This shift was partly attributed to the Bank of Canada’s recent interest rate hike, which had an impact on buyers.
The Canadian Real Estate Association (CREA) disclosed that seasonally adjusted home sales in August totaled 38,345, marking a 4.1 percent decrease from July. However, when considering the actual number of sales, there was an increase of 5.3 percent compared to the previous year, with a total of 40,257 sales.
The cooling of the housing market may be seen as a welcome development for potential buyers, especially after witnessing soaring housing costs during much of the COVID-19 pandemic. Buyers had recently faced a series of interest rate hikes as prices started to decline, with the Bank of Canada implementing further increases in July, thereby making August the first full month in this new interest rate environment.
Despite the decline in sales, CREA Chair Larry Cerqua noted a return of stability to the market. He observed that sales in August were impacted by declines in various regions, including Greater Vancouver, the Fraser Valley in British Columbia, Montreal, Ottawa, Hamilton, Burlington in Ontario, as well as London and St. Thomas in Ontario.
Cerqua stated, “With sales slowing and new listings returning to more normal levels, demand and supply are continuing to come into better balance. This is giving buyers more time and more choice.”
Cerqua’s comments were based on the increase in new listings, which reached 69,438, reflecting a 5.5 percent rise compared to the previous August. The seasonally adjusted number of new listings fell for the fifth consecutive month but still rose slightly by less than one percent compared to July, reaching 68,276.
Robert Kavcic, a senior economist with BMO Capital Markets, pointed out that the flow of new listings has become much stronger than earlier in the year and is now aligning with pre-COVID norms. This, combined with sluggish sales, has had a noticeable impact on softening the market balance.
In terms of pricing, the seasonally adjusted average price of a home in August decreased by 2.3 percent from July, reaching $674,184. However, when comparing prices to the previous year, there was an increase of 2.1 percent, with the actual price averaging $650,140.
Sherry Cooper, chief economist with Dominion Lending Centres, noted that housing affordability remains a significant concern. However, recent data for the second quarter has shown an increase in first-time home purchases. Regional variations have also re-emerged, with price growth remaining strong in Quebec and the East Coast, followed by British Columbia and the Prairies. Ontario exhibited mixed results, with some areas experiencing price increases and others facing declines.
Cooper anticipates that the Bank of Canada will likely ease off on further rate hikes, and as the housing supply gradually increases, housing activity is expected to pick up in the coming months. She noted that year-over-year home prices are likely to rise due to base effects, with lower prices recorded in the fall and winter of the previous year, making year-over-year comparisons more favorable. However, it is essential to avoid a sudden surge in activity, as this could prompt the central bank to reconsider its rate pause.