October Supply Crunch Continues to Push Canadian Housing Prices: CREA

October Supply Crunch Continues to Push Canadian Housing Prices: CREA

By: Zoocasa

A lack of new housing supply and listings continues to underpin price growth in real estate markets across Canada, according to the Canadian Real Estate Association (CREA) in its October report.

 

Combined with overall shrinking inventory levels and rising sales, that’s leading to increasingly tight conditions for buyers, especially in the nation’s largest urban markets.

 

Strong Sales Growth Outpacing Available Homes for Sale

 

Months of inventory – the amount of time it would take to sell every home with consistent sale volume - shrank to 4.4 months for the country as a whole at the end of the month — the lowest recorded since April 2017. Meanwhile, the sales-to-new-listings ratio (SNLR), which measures buyer demand and competitiveness versus supply, is also far higher than usual. It has been creeping up steadily this year and is now at 63.7% — 10 percentage points above its long-term average of 53.6%, and indicating Canada can now be considered a sellers’ market.

 

And, while new listings have declined, sales have increased 12.9% year over year; they’re now just 7% below the peak reached in 2016 and 2017, and a full 20% higher than the year’s low recorded in February.

 

Some Markets Still Struggling with Stress Test

 

However, while CREA’s report states that the market’s “current reading” suggests sales negotiations are becoming increasingly seller-friendly, that strong overall picture is masking “significant regional variations”.

“Based on a comparison of the SNLR with the long-term average, just over two-thirds of all local markets were in balanced market territory in October, including the GTA and Lower Mainland of British Columbia. Nonetheless, sales negotiations remain tilted in favour of buyers in housing markets located in Alberta, Saskatchewan and Newfoundland & Labrador,” it reads.

 

As has been the long-term trend, the Prairies continue to struggle from the effects of overbuilding during oil-boom times and are now suffering from an excess of inventory.

 

“It’s a full-blown buyer’s market or on the cusp of one in a number of housing markets across the Prairies and in Newfoundland,” says Gregory Klump, CREA’s chief economist. “Home buyers there have the upper hand in purchase negotiations and the mortgage stress test has contributed to that by reducing the number of competing buyers who can qualify for mortgage financing while market conditions are in their favour.”

 

National Home Prices Continue to Rise

 

As a result of the widening gap between supply and demand, national home prices are on a steady rise. The benchmark price is up 1.8% year over year to $633,600 in the 19 markets CREA tracks. (The benchmark price is considered a more accurate representation of a “typical” home price than an average.)

 

While prices have stabilized somewhat in the Greater Vancouver Area and B.C.’s Lower Mainland this October, they are still down on an annual basis. The Prairies’ property prices have been on a steady downward trajectory over the last five years without signs of stopping. In contrast, small urban centres in Southwestern Ontario, such as the Kitchener real estate, Hamilton real estate and Niagara real estate markets, are on the upswing, posting healthy gains.

The most expensive city in the country is the tony suburb of Oakville, at a benchmark price of $1,033,500. However, it is outpacing Vancouver and Toronto because its inventory is made up of mostly detached houses, while the larger cities include less expensive property types like condos and townhouses, which drag overall prices down due to their lower price point.

 

The second most expensive city in the country is Vancouver, with its benchmark price at $994,900 and the third is the Lower Mainland at $940,300. Toronto comes in at fifth, with benchmark prices at $814,400.

 

For more information on the national housing market this October, check out the infographic below:

 

INFOGRAPHIC

 

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