Recent data suggests that Canada’s housing market recovery may not be as imminent as previously hoped, with reports indicating a decline in home sales and a surge in new listings across major Canadian cities. Despite gains observed in December and January, February’s figures paint a less optimistic picture, indicating that challenges such as affordability constraints continue to hinder buyer activity.
According to economist Robert Hogue from Royal Bank of Canada (RBC), February’s declines partially offset the gains seen in the previous months, underscoring the persistent affordability issues that deter potential buyers. While sellers have returned to the market, with notable increases in new listings recorded in cities like Vancouver, Toronto, Edmonton, Hamilton, and Montreal, the heightened inventory has failed to stimulate buyer demand.
In Toronto, Canada’s largest housing market, sales dropped by 12 percent compared to the previous month, reversing some of the gains from earlier periods. Similarly, Vancouver’s home sales remain historically low, signaling ongoing challenges in affordability. Despite a surge in new listings, particularly in Calgary, where the market has remained robust, RBC expects prices to remain mainly flat in the near future, with the possibility of declines if distressed sellers enter the market in large numbers.
While February’s job numbers surpassed expectations, economists caution that the headline figures may mask underlying weaknesses in the labor market. Despite significant gains in full-time employment, the overall labor market appears to be cooling, with wage growth slowing and gains largely limited to self-employment and the public sector.
In light of these developments, RBC anticipates that a robust and sustained housing market recovery may not materialize until the second half of 2024, coinciding with potential further declines in interest rates.
