Global Courant
An analysis of early housing market reports shows that the Bank of Canada’s latest rate hike affected buyers across the country differently, with home sales falling in some cities and rising in others.
A report released Friday by economists at RBC says the rate hike in June, as well as an expected rise next week, resulted in situations where buyers “withdrew” in cities like Toronto, Hamilton, Ottawa and Vancouver but “remained undaunted” in Calgary, Edmonton, Montreal and Fraser Valley in BC.
The economists also point to “sharp price gains” in Toronto, Vancouver and other parts of Ontario and BC this past spring, which may have “scared some buyers.”
“The good news is that supply continues to rise. We estimate that more homes have come up for sale in every major market in the past month,” said the report from RBC assistant chief economist Robert Hogue and economist Rachel Battaglia.
“That came on the heels of significant, broad-based increases in May. So far, growing supply hasn’t done much to ease (recently resurfaced) price pressures. But if it continues, we would expect the pace of slow in the next months.”
The report comes after RBC released another report in late June that found homeownership has become slightly more affordable, according to the bank’s stats, but is still a major problem.
In June, the Bank of Canada raised its overnight rate by 25 basis points to 4.75 percent, the first increase since pausing interest rate hikes in January. One basis point is equal to one-hundredth of one percent.
The bank began raising interest rates in March 2022 in an effort to contain inflation, which rose to 8.1 percent last summer but has since fallen to 3.4 percent in June.
The RBC report focuses specifically on the latest market trends in Toronto, Vancouver, Montreal and Calgary.
The economists say they are “surprised” by how quickly markets in Toronto and Vancouver, for example, recovered in the spring.
Toronto home resales rose 32 percent in April and May, but fell 6.9 percent month on month in June, the report says, despite more properties on the market.
Prices also continued to rise, with the MLS Home Price Index composite benchmark price rising 2.5 percent month-on-month to $1.16 million in June.
“But more balanced conditions point to a slower pace of appreciation in the coming months,” the report said. “Higher interest rates are poised to keep homeownership affordability extremely challenging for buyers.”
Property values also rose 1.3 percent in Vancouver last month, following a combined 3.1 percent increase in the previous two months.
“We think that buyers will increasingly push back further price increases in the coming period,” the economists write.
“Despite a slight improvement in the first quarter of this year, housing affordability in Vancouver remains at crisis levels. No doubt this poses huge challenges for many buyers.”
A “solid growth in supply” appears to have contributed to an increase in Montreal home resales, which rose about 11 percent month over month in June from 8.1 percent in May and 3.9 percent in April.
The number of new listings has also increased by 16 percent over the past three months, although the median value for a single-family home has remained unchanged from May to June.
However, home resales in Montreal are still about 15 percent below pre-pandemic levels, the report said.
Calgary also saw “significantly” more homes on the market in the past two months, with home resales up about nine percent month-on-month in June from six percent in May.
But with demand still well above supply, prices rose 4.4 percent year-on-year.
“Calgary’s impressive population growth and relatively affordable position (compared to other major Canadian cities) is likely to continue this trend in the second half of the year,” the report said.
With files CTVNews.ca Writer Alexandra Mae Jones, CTV National News Producer Jordan Gowling and The Canadian Press
