Canadian Real Estate Market Continues to Decline as Sales Volume Falls

The Canadian real estate market has witnessed a continued decline in sales volume, which was expected given the seasonal trends. According to monthly statistics from the Canadian Real Estate Association (CREA), national home sales decreased by 4.1% in August compared to the previous month. However, when compared to August 2022, there was a 5.3% improvement in actual monthly activity, indicating a recovery from the challenging market conditions experienced during the previous year.

Despite this recovery, the real estate industry is currently experiencing a recessionary period. Sales numbers are below the 10-year average, indicating a slowdown from the highs observed during the pandemic. The market is now more consistent with sustainable levels seen in 2018 and 2019.

Supply of properties has been increasing at a slower rate, with a 0.8% month-over-month growth in newly listed properties. This has led to a greater supply-demand imbalance, trending towards a buyer’s market by the end of the year if the current conditions persist.

In terms of price, there has been minimal change on a year-over-year basis, with a modest increase of 0.4% since August last year. This marks the first increase in the House Price Index (HPI) after a decline in the first quarter of 2022. However, it is important to note that the HPI is considered a lagging indicator, and average house prices continue to trend downwards.

Price growth varies across provinces, with British Columbia, Alberta, Manitoba, Quebec, and Newfoundland experiencing growth close to the rate of inflation. In Saskatchewan, Ontario, and Prince Edward Island, there has been little change or a decline when adjusted for inflation. In contrast, New Brunswick and Nova Scotia have seen outsized growth, possibly due to interprovincial migration from Ontario.

The market balance is currently looking balanced, but both sales-to-new listings ratio and months of inventory are trending negatively. Listings continue to outpace sales, which could result in a buyer’s market by the end of the year if the trend persists.

Overall, the Canadian real estate market is in a transitional period, with sales volume declining and supply outpacing demand. Industry experts suggest that these conditions may lead to a buyer’s market in the near future.

Definitions:
1. CREA – Canadian Real Estate Association
2. HPI – House Price Index

Sources:
– Canadian Real Estate Association (CREA)
– RBC’s report: “Canadians on the move: will a pandemic shakeup in migration trends hold?”
– Daniel Foch, real estate broker and expert in the Canadian media.