The Canadian housing market is finally emerging from a year-long slump, with April 2023 proving to be a pivotal month for its turnaround.
RBC Economic’s Assistant Chief Economist Robert Hogue analyzed April data from the Canadian Real Estate Association, noting home resales experienced a significant spurt, rising 11.3 per cent nationwide, the strongest month-over-month frown advance in almost three years.
The MLS Home Price Index recorded a 1.6 per cent gain in April, marking the first consecutive monthly increase since early 2022. The majority of local markets contributed to this upswing.
This surge in activity, combined with back-to-back monthly price increases and tightening demand-supply conditions, have tipped the scales in favour of sellers, putting them back in the driver’s seat in major markets across the country.
Toronto and Vancouver lead the rebound; other markets follow suit
The resurgence in Toronto and Vancouver’s housing markets has been particularly notable. Home resales in these cities jumped 27 per cent and 25 per cent, respectively, effectively rolling back a significant portion of the previous correction.
Buyers in both markets are regaining confidence, especially now that the Bank of Canada has paused its aggressive rate hike campaign. This renewed optimism is setting the stage for a broader recovery across other markets as well.
Other markets are also witnessing solid month-over-month increases in home resales: Victoria (up 13 per cent), Calgary (up 12 per cent), Hamilton (up 18 per cent), Kitchener-Waterloo (up 16 per cent), London (up 15 per cent), Ottawa (up 14 per cent), and Halifax (up 17 per cent). These advances are occurring despite further declines in homes listed for sale in most cases, underlining the strong demand-supply dynamics driving the market.
Source: CREA, RBC Economics
Property values rise across the country, signalling the end of the price correction
Demand-supply conditions have tightened in the majority of locations, granting sellers increased pricing power. Seizing this opportunity, sellers wasted no time capitalizing on the favourable conditions.
By Hogue’s count, the MLS Home Price Index rose in over three-quarters of local markets in April, with notable monthly gains in Hamilton (5.4 per cent), Cambridge (5.1 per cent), and Kitchener-Waterloo (3.9 per cent). Toronto witnessed a 2.4 per cent increase, adding over $35,000 to the benchmark price. Similarly, Vancouver’s benchmark price rose by $23,000 (or 2.0 per cent) in the past two months. Montreal experienced a more subdued rebound, with the MLS HPI appreciating just 0.7 per cent($3,500).
Strong market performance raises upside risk to forecasts
The impressive vigour displayed by the housing market in April has taken analysts by surprise, including RBC Economics and Robert Hogue. While they anticipated the market to reach its cyclical bottom this spring, they initially expected a slower rebound.
The loss of affordability over the past year led them to believe that buyers would remain cautious for a considerable period. However, Hogue writes the recent surge in demand suggests that soaring immigration and a thriving rental market may be the primary driving forces fueling homebuyer demand. Consequently, there is now an increased possibility of prices extending the gains seen in April, potentially even surpassing expectations.
Read April’s Housing Market report from RBC Economics here.
This will almost certainly set the Bank of Canada to continue to raise interest rates again. We aren’t going down anytime soon.