Rising home listings could point to a troubling trend, owners may be compelled to sell properties
Meanwhile, Canada is now the Americas' most competitive economy
After a muted April, Canadian home sales activity surged in May, but it may be masking an important structural change in the housing market.
The Canadian Real Estate Association’s latest survey Monday showed home sales across the country rose 56.9 per cent in May compared to April.
But the report also revealed a 69 per cent increase in listings in May compared to April. While, actual (not seasonally adjusted) new supply was still 38.1 per cent below May 2019, analysts believe it signals a diversion between supply and demand.
“There are early signs demand and supply are decoupling,” said Robert Hogue, senior economist at Royal Bank of Canada. “We expect further decoupling in the period ahead. Economic hardship is no doubt taking a toll on a number of current homeowners — including investors. Some of them could be running out of options once government support programs and mortgage payment deferrals end, and may be compelled to sell their property.”
Robert Kavcic of the Bank of Montreal notes that the speed at which new listings come to the market in the months ahead, versus the pent-up demand “will ultimately dictate the market balance and price action, which to date has held relatively steady.”
“It’s entirely possible that, at least in some of the stronger pre-COVID markets, listings get snapped up quickly when they start to come back online more substantially, leaving less of near-term impact on prices,” said Kavcic in a note to clients. “Longer term, challenges will persist across some pockets of the market. This all could shape a market that looks less extremely negative in the near term than some fear, but one that also looks flatter over the medium term.”
CREA data shows the actual (not seasonally adjusted) national average sale price fell 2.6 per cent year-on-year, signalling that prices may be under some pressure. The association’s Home Price Index stood at -0.08 per cent month-on-month and was still up 5.3 per cent year-on-year.
RBC’s Hogue believes downward price pressure will build in most markets in the coming months. “Strong starting points in Ottawa, Montreal, Toronto and Halifax will provide these markets with a temporary buffer. Prices are already declining in Alberta, and Newfoundland and Labrador. Nationwide, we expect benchmark prices to fall 7 per cent by the middle of 2021 though believe a widespread collapse in property values is unlikely.”
These might be temporary fluctuations, though, as markets adjust after the pandemic. A new survey by RE/Max Canada noted that 56 per cent of the Canadians polled are planning to engage in the real estate market in less than a year. Around 44 per cent believe the real estate market will bounce back to the strength it was before COVID-19 by 2021, according to the survey published this morning.
“Regions such as Toronto, Ottawa, and Vancouver are excellent examples, and are already experiencing an uptick in activity and the number of multiple-offer scenarios, pointing to a post-lockdown housing market outlook that is not nearly as dire as some suggested,” said Christopher Alexander, executive vice president and regional director, RE/MAX of Ontario-Atlantic Canada.
Move over United States, Canada is now the most competitive economy in the Americas. A new edition of Switzerland-based Institute for Management Development’s World Competitiveness Ranking released this morning showed U.S. slumping to 10th position, compared to 3rd place last year. Canada, however, climbed the charts, jumping five places to emerge as the 8th most competitive economy in the world.
Canada’s rise in the ranking was centered around improvements in measures related to its labour market and in the openness of its society, the survey noted.
The U.S.’ fall was attributed to rising trade tensions under U.S. President Donald Trump.
“Trade wars have damaged both China and the USA’s economies, reversing their positive growth trajectories. China this year dropped to 20th position from 14th last year,” the survey noted.
Singapore led the rankings, with Denmark, Switzerland, the Netherlands and Hong Kong — in that order — emerging as the world’s five most competitive economies.