Listings are rising in some major markets as buyers are unable to afford to buy
Signs of a softening condominium market in several major Canadian cities is reflective of the impact of higher rates, especially with a pause by the BoC less certain due to the inflation bounceback.
But does the growing number of listings and buyers constrained by affordability foretell a correction in the condo market?
A new report from RE/MAX Canada analyzed 100 communities across seven major markets: Greater Vancouver, Fraser Valley, Calgary, Edmonton, Greater Toronto Area, Ottawa, and Halifax-Dartmouth.
It found that apart from Calgary (with a 22% increase), and Edmonton (up 3%), the markets saw weaker sales in the first eight months of 2023 than in the same period of 2022.
Toronto posted a significant and concerning rise in listings at 24% year-over-year in August while the Fraser Valley posted a 28% gain and there were modest gains in Halifax and Edmonton. Calgary saw a 38% jump in listings, but it had a sales-to-new-listings ratio of 98%. Greater Vancouver and Ottawa had lower levels of inventory.
For now, prices are holding up in Greater Vancouver, Calgary, and Halifax-Dartmouth, while slipping in the Fraser Valley, Edmonton, the Greater Toronto Area, and Ottawa.
"It's really a mixed bag of results in markets across the country when it comes to condominiums this year," says Christopher Alexander, president of RE/MAX Canada. "While there was some momentum in the market early in September that dovetailed with the Bank of Canada's announcement to pause interest rate hikes, the most recent inflation numbers extinguished the flame. Lifecycle sales will continue to contribute to steady activity, but a comeback similar to that of the second quarter is likely out of the question."
Moving out
The report found that, constrained by affordability issues, more Canadians are choosing to move to a more affordable province.
The gains in sales in Alberta’s condo markets were supported by interprovincial movers from Ontario and British Columbia. Ontario welcomed 125,000 international migrants but less than 15,000 people moved to the province from other parts of Canada, the lowest number since 2000 according to Statistics Canada.
"The cost of living is out of control in larger centres and even the most affordable housing now carries a pretty substantial sticker price," says Alexander. "Earnings have not kept pace with housing costs and inflation continues to stretch household budgets thin. Taxation is also an issue, with the City of Toronto gearing up to introduce an even more punitive Municipal Land Transfer Tax in January of 2024. Is it any wonder why buyers are heading west to Calgary and Edmonton or east to more affordable markets such as Halifax?"
Luxury condos
The RE/MAX Canada report shows that the luxury condo market remains healthy in Toronto and Calgary while activity has slowed at higher price points in Greater Vancouver, Fraser Valley, and Halifax.
Downsizers selling expensive freehold homes is supportive of the condo market and it appears that a widespread correction is not on the cards with immigration and other factors maintaining the market overall.
"We do anticipate a softer end to the year, as economic conditions erode buying power and impact consumer confidence," says Elton Ash, EVP, RE/MAX Canada. "The signs are already evident with inventory building and new projects being delayed or cancelled. Savvy buyers will find some opportunity in larger markets, and although some further softening in values is anticipated in most centres, the impact will be somewhat tempered by the tight rental market and continued population growth. Look for condominium sales to rebound in the second or third quarter of 2024, as quantitative tightening eases, re-invigorating homebuying intentions."
