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Buyers in Canada eased off in May, a sign that higher rates have affected demand, leading to sales and prices coming off slightly from April, a new report has found. RBC Economics Monthly Housing Update suggested a “spring-long stalemate between buyers and sellers stretched into May” as buyers “play the waiting game” for interest rates to come down.
It noted buyers were likely waiting until June for the first interest rate decrease in four years from the Bank of Canada, though the 25-basis-point cut is unlikely to spur much activity as budget-constrained buyers are unlikely to see much difference in purchasing power.
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The report added that several more rate cuts would be required to “unleash” pent-up demand that has built up in many markets over the last few years.
With buyers on the sidelines, sales in Canada declined 0.6 per cent in May from April, while prices dropped 0.2 per cent. At the same time, inventory for the whole Canadian market has rebounded to pre-pandemic levels — about 4.4 months of supply. That has been driven by new listings increasing for the fourth month in a row.
Overall, the Canadian market is now reflecting a balance between buyers and sellers, with the sales-to-new-listing ratio at 53 per cent, below the 60 per cent threshold that would indicate a market favouring sellers.
The report addd that sales and prices are partly being held up nationally by still strong activity in the Prairies, particularly in Calgary and Edmonton.
In Calgary, the MLS Price Index increased nearly 10 per cent in May year over year, while Edmonton saw the price index up about six per cent.
Canada’s large market Toronto saw its index, in contrast, fall 0.4 per cent.
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