The effects of tougher borrowing conditions and steep home prices continued to slow Canada’s housing market in August, with the latest data reflecting contracting sales activity and price growth.
According to the Canadian Real Estate Association (CREA), a total of 40,257 homes traded hands over the course of the month – that’s up 5.3% from the same period last year, but lower than the 8.7% annual increase recorded in July, indicating the year-over-year lead is narrowing. On a monthly basis, sales activity fell by -4.1%.
National average sale price growth also appears to be flattening out, registering a scant 2.1% uptick from 2022, at $650,140. Compared to the market’s pandemic-era peak back in February of that year, average home prices have dropped 20% – a dollar amount of -$166,580.
“While prices are stabilizing at the national level, regional differences are re-emerging,” reads CREA’s report. “Price growth has remained solid in Quebec and the East Coast, followed by British Columbia and the Prairies. Ontario is now a mixed bag, still with some of the bigger increases but also some of the bigger declines.”
This is also reflected in the pace of the MLS Home Price Index, which measures the value of the most typical type of home sold, which climbed 0.4% both month over month and year over year. A total of 65,831 homes were listed – that’s largely flat (0.8%) from July, but indicating new supply is starting to return to more normalized levels.
Overall, buyer appetite dropped the most in Greater Vancouver (as well as the Fraser Valley), followed by Montreal, Ottawa, Hamilton- Burlington as well as London and St. Thomas.
Bank of Canada July hike took bite out of August affordability
That demand slipped was largely anticipated, says CREA Senior Economist Shaun Cathcart, given the market was absorbing the latest in a series of interest rate hikes; the Bank of Canada increased its benchmark rate on July 12 to a full 5%, which in turn drove Canada’s prime rate to 7.2%, and variable mortgage pricing higher across the board.
"August was the first full month of housing data following the Bank of Canada’s July rate hike, so a dip in activity was expected,” he stated in the association’s release. “The demand is obviously still there, and it will be back, but as the housing affordability crisis re-emerges as a top policy issue, for now, the slowdown on the buyer side should help keep a lid on prices.”
An improved selection of homes for sale will also help ease buyer conditions into the fall months; the months of inventory (which reflects the length of time it would take to completely sell off all properties for sale under current market conditions) came in at 3.4. While still well below the long-term trend of five months, it’s a bump from the 3.2 recorded in July and 3.1 in May and June. As a result, the sales-to-new listings ratio slid to 56.2%, down from July and a peak of 67.4% in April. The measure is now back in line with its long-term average of 55.2%, according to CREA.
“With sales slowing and new listings returning to more normal levels, demand and supply are continuing to come into better balance” said Larry Cerqua, Chair of CREA. “This is giving buyers more time and more choice.