Well, 2023 had one last surprise up its sleeve: home resale transactions in Canada bucked the softening trend and rebounded a solid 8.7% m/m in December. What’s more, markets in Ontario and British Columbia—regions that cooled off the most since summer—recorded some of the larger increases.
It seems that a combination of price concessions from sellers and modest mortgage rate declines spurred more buyers into action. Transactions largely drew from pre-existing inventory as new listings fell for a third-straight month (down a significant 5.1% m/m nationwide).
Home prices continue to drift lower overall despite tighter demand-supply conditions. The composite MLS Home Price Index for Canada edged down 0.8% m/m in December, following declines ranging between -0.5% and -1.0% in the previous three months.
Activity spikes in Toronto…
The Toronto-area market woke up from its slumber as 2023 drew to a close. Home resales spiked 21% in December from a near 15-year low in November (excluding the pandemic shutdown period). The pace also picked up materially in other parts of Ontario, including London-St. Thomas (up 26% m/m), Ottawa (up 19%), Brantford (up 18%), Cambridge (up 18%), North Bay (up 16%) and Kitchener-Waterloo (up 10%)—albeit all from historically weak levels.
…and parts of British Columbia
It was a similar story in several B.C. markets. Resale transactions jumped 19% m/m in the Fraser Valley, 12% in Victoria and Chilliwack, and 5% in Vancouver, partly reversing some of the significant declines that took place in prior months.
Yet Ontario and B.C. prices still trending lower
The end-of-year sparks did little to alter softening price trends. MLS HPIs continued to decline on a month-to-month basis in all these markets, with the rate of decline generally accelerating in B.C. The tightening in demand-supply conditions in December would need to be sustained for several more months in order for prices to change course.
Prairie markets vibrant overall
Home resales picked up in Alberta, Saskatchewan and Manitoba last month, led by gains in Winnipeg (+12% m/m), Edmonton (+6.2%) and Regina (+3.1%). Transaction levels remain generally strong in the Prairie region—well above where they were pre-pandemic in Alberta and Saskatchewan, and only marginally off in Manitoba—and demand-supply conditions are tight. Property values in Alberta are up the most in the country from a year ago, led by Calgary (+10.5%).
Balanced conditions despite soft resales in Quebec and Atlantic Canada
For the most part, the housing market continues to operate well below pre-pandemic levels west of Ontario (with the exception of Newfoundland and Labrador). Home resales rose in December, with month-to-month gains recorded in Sherbrooke (+15%), Quebec City (+12%), Halifax (+3.8%), Moncton (+2.8%) and Montreal (+0.4%). But these reversed only part of the declines since early-2022. Low inventories have kept demand-supply conditions broadly balanced across Quebec and Atlantic Canada, though prices have come under downward pressure of late in some markets including Montreal (where the MLS HPI slipped 0.4% m/m in December), Saint John (-0.6%) and Fredericton (-0.6%).
One-month blip?
We’d warn against reading too much into a single month’s burst of activity, especially when it comes at a seasonal low point (December is the quietest period of the year for the housing market). Large seasonal adjustment factors in the statistics tend blow up even small month-to-month changes—up or down. January won’t bring much clarity either since it’s the second quietest month of the year. So any confirmation of a cyclical turning point will have to wait. Whether the bottom has been reached or not, Canada’s housing market remains soft in most regions at this stage with many potential buyers struggling to afford a purchase.
Not out of the woods just yet
We expect this softness will persist through the first half of this year with a market recovery gaining strength thereafter as interest rate cuts accumulate. Our view is the Bank of Canada will pivot around mid-year and slash its policy rate by 100 basis points over the second half of this year, followed by further 100 basis points in 2025. Longer-term interest rates are poised move lower ahead of the Bank’s policy though (as they already have in recent weeks). We see prices firming up after activity has turned and demand-supply conditions have tightened sufficiently—possibly sometime in the third quarter. That said, any price recovery will be restrained by lingering affordability issues.
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Robert Hogue is an Assistant Chief Economist at RBC responsible for providing analysis and forecasts on the Canadian housing market and provincial economies. He joined RBC in 2008.
Rachel Battaglia is an economist at RBC. She is a member of the Macro and Regional Analysis Group, providing analysis for the provincial macroeconomic outlook.
Disclaimer
This article is intended as general information only and is not to be relied upon as constituting legal, financial or other professional advice. A professional advisor should be consulted regarding your specific situation. Information presented is believed to be factual and up-to-date but we do not guarantee its accuracy and it should not be regarded as a complete analysis of the subjects discussed. All expressions of opinion reflect the judgment of the authors as of the date of publication and are subject to change. No endorsem*nt of any third parties or their advice, opinions, information, products or services is expressly given or implied by Royal Bank of Canada or any of its affiliates.
FAQs
Well, 2023 had one last surprise up its sleeve: home resale transactions in Canada bucked the softening trend and rebounded a solid 8.7% m/m in December. What's more, markets in Ontario and British Columbia—regions that cooled off the most since summer—recorded some of the larger increases.
What are the new housing rules in Canada 2023? ›
The two-year ban on non-Canadians purchasing residential property comes into force on January 1, 2023. The federal government released the regulation on December 21, 2022. Regulations includes definitions, exceptions, and enforcement elements to help individuals understand and comply with the law.
What is the problem with the housing market in Canada? ›
Over time it became more challenging to build homes in Canada. Restrictive planning policies prevented the construction of high-density housing near existing infrastructure and transit. Municipalities started charging extra fees to help meet budget demands. Provinces fell behind on supportive housing investments.
What is the forecast for real estate in Canada? ›
Analyzing the Canadian Real Estate Market: A 5-Year Outlook
The next five years in the Canadian real estate market will be marked by steady growth. While the flurry of activity witnessed in 2020, 2021, and 2022 has tapered, the market remained buoyant in 2023-2024.
Will house prices go up in 2024 in Ontario? ›
A: The Ontario housing market is expected to continue its growth trend into 2024, with an increase in housing prices across most types due to factors such as a strong economy, low interest rates, and high immigration rates. A shift towards suburban and rural areas, along with an increase in renters, is also expected.
What will happen to the Canadian housing market in 2023? ›
Well, 2023 had one last surprise up its sleeve: home resale transactions in Canada bucked the softening trend and rebounded a solid 8.7% m/m in December. What's more, markets in Ontario and British Columbia—regions that cooled off the most since summer—recorded some of the larger increases.
What is the new Canadian housing policy? ›
To help more Canadians, particularly younger generations, buy a first home, new mortgage rules came into effect on August 1, 2024, allowing 30 year insured mortgage amortizations for first-time homebuyers purchasing new builds.
What is the main cause of the housing crisis in Canada? ›
The imbalance between housing demand and supply is a significant reason for the crisis, especially in urban hubs. Increasing housing developments, streamlining construction permits, and providing incentives for builders can help alleviate the housing shortage.
When did the housing market crash in Canada? ›
Toronto had one housing bubble, which burst in 1989. Otherwise, inflation-adjusted housing prices in all major Canadian cities remained remarkably stable from 1980 until 2001.
Why is Canada housing supply so low? ›
At its heart, Canada's housing crisis stems from a growing gap between housing demand and supply—many homes are needed, but too few are built. An estimated 5.8 million new homes nationwide are required to restore some semblance of affordability by 2030, but Canada's currently on track to build less than half that.
The average home price in Canada for June 2024 was $696,179, which is a drop of 1.6 per cent compared to the year before.
Why are houses so expensive in Canada? ›
Immigration. The influx of new immigrants to Canada increases the demand for housing, driving up house prices as supply struggles to meet this growing demand. This inflow is especially true in cities such as Toronto and Vancouver, which have seen some of the highest rates of immigration in recent years.
Will housing ever be affordable again in Canada? ›
House prices in Canada will keep on rising every day; as long as there is population growth and immigration, house prices will continue to rise. In conclusion, there is no guarantee that real estate in Canada will become more affordable, not to mention the chance that it can be even more expensive than it already is.
Should I wait until spring 2024 to sell my house? ›
Best Time to Sell Your House for a Higher Price
April, June, and July are the best months to sell your house in California. The median sale price of houses in June 2023, was $796,400, which is expected to grow more in 2024. However, cities like Arcadia and San Mateo follow an upward trend throughout the year.
Is Canada in a housing bubble? ›
Prices peaked in the Spring of 2022, and according to our analysis, many Canadian housing markets are already bursting bubbles. There has been a price turnaround, but purchases are well below the 10-year average. In a May Reuters poll, the average analyst expects Canadian home prices to rise 1.5% per cent in 2024.
Is it a buyers or sellers market in Ontario? ›
Real Estate Market
The sales to new listings ratio (SNLR) in Ontario was 40% during July 2024, indicating a buyers market. On a monthly basis, that's decreased by 2.6% compared to the previous month. Ontario's yearly sales to new listings ratio has decreased by 11.0% over the last 12 months.
What is the new rule for houses in Canada? ›
The new regulations prohibit the purchase of residential property by foreign investors who are not Canadian citizens or permanent residents. But does not apply to Canadian citizens or permanent residents, who can still purchase property as before.
What are the new rules in Canada 2023? ›
The new Canadian immigration rules state that foreign students must have a valid study permit to enter Canada. Furthermore, they must also have a valid passport and a return ticket home. They must also submit to a health check and provide proof of insurance.
Can US citizens buy property in Canada in 2023? ›
If you're not a Canadian citizen or permanent resident, buying a home in Canada may be off the table for the next couple of years. On January 1st, 2023, the foreign home ownership ban—formally known as the Prohibition on the Purchase of Residential Property by Non-Canadians Act—went into effect in Canada.
Who can buy a house in Canada 2023? ›
1) Those authorized to work in Canada for more than 183 days may purchase residential property. As of March 27, 2023, a majority of work permit holders – or those who are authorized to work in Canada under the Immigration and Refugee Protection Regulations – will be authorized to purchase residential property.
