Economic insight provided by Alberta Central Chief Economist Charles St-Arnaud.
Bottom line
National house prices declined for a seventh consecutive month. Since the start of the correction, prices nationally have fallen by almost 10%. However, the correction has been bigger in some markets, especially those with the largest post-pandemic gains. Rising interest rates since the start of the year have had a cooling impact on the housing market, especially with most rate hikes expected before the end of the year.
In Alberta, housing market activity eased but remained robust by historical standards. We note a divergence between the metropolitan area, with Calgary amongst the strongest cities in Canada while Edmonton is amongst the weakest. With less froth accumulated during the pandemic, Alberta’s market is less prone to a sharp correction than other regions, notably Ontario. In addition, increased migration to Alberta will also support activity and prices compared to elsewhere in the country.
Low interest rates have been one of the main drivers of the housing market, supporting affordability. The moderation in activity since the Bank of Canada started to raise rates in March points to further weakness this year, especially with the policy rate having increased 300bp since the beginning of the year and likely to rise by another 75bp before the end of year. However, the continued lack of supply in many regions and increased immigration are expected to continue to provide some support.
Activity in the Canadian housing market decreased by 3.9% m-o-m seasonally-adjusted in September, the seventh consecutive month of decline. The number of transactions, at 35.0k, is about 15% lower than on average in 2019. It is important to note that all the year-on-year comparisons are distorted by the sharp boom in activity a year ago and, as a result, we will focus on the changes compared to 2019. Activity declined in all provinces and decreased the most on the month in PEI, Nova Scotia, and Manitoba. In Alberta, the number of transactions eased by 3.2% m-o-m in September, also the seventh consecutive month of decline. Nevertheless, activity remains and is about 28% higher than in 2019.
Despite the correction nationally, there are some divergences between provincial markets. Compared to the average level of 2019, the number of transactions is well above its pre-pandemic level in Newfoundland (+37%), Saskatchewan (+31%) and Alberta (+28%). On the flip side, activity is well below in Ontario (-27%), PEI (-23%), and BC (-21%).
New listings eased by 0.8% m-o-m seasonally-adjusted in September. Most provinces saw a decline in new listings, except for Saskatchewan (+5.4% m-o-m) and BC (+3.3% m-o-m). The biggest decreases were in Nova Scotia (-6.2% m-o-m), PEI (-4.5% m-o-m), and Ontario (2.6% m-o-m). In Alberta, new listings were lower by 1.1% m-o-m.
With sales activity weaker than listings in most regions, the month-of-supply measure[1] eased to 3.7 nationally, still below its pre-pandemic level, but 2.0 months higher than its recent low. Based on this measure, most provinces have seen an increase in inventories but are still below their 2019 levels, with the exception of Ontario and PEI. Compared to the lowest level of inventory over the past two years, the month-of-supply has increased the most in PEI (+4.0 months), BC (+3.6 months), Quebec (+2.1 months), and Ontario (+1.9 months). It has increased the least in Newfoundland (+0.7 months), Saskatchewan (+1.0 months), and Manitoba (+1.4 months). With a month-of-supply at 3.6, Alberta’s housing market remains much tighter than before the pandemic (7.0 months on average in 2019).
With sales moderating and increasing inventories, the MLS House Price Index declined by 1.4% m-o-m, its seventh consecutive month of decline. Compared to last year, house prices rose nationally by 3.8%. The biggest monthly declines were in Barrie (-2.7% m-o-m), Niagara (-2.5% m-o-m), Vancouver Island (-2.1% m-o-m) BC lower mainland (-1.8% m-o-m), and Hamilton-Burlington (-1.7% m-o-m). Prices increased on the month only in Oakville-Milton (+1.3% m-o-m), Ottawa (+0.5% m-o-m) and Calgary (+0.3% m-o-m).
On a y-o-y basis, the most significant increases were in Moncton (+20% y-o-y), Victoria (+15%), Vancouver Island (+14% m-o-m), and Calgary (+12%), while they declined in Hamilton-Burlington (-2.6% y-o-y), Oakville-Milton (-0.5 % y-o-y) and Niagara (-0.2% y-o-y).
Compared to their recent peaks, prices have declined the most in Oakville-Milton (-16%), Hamilton-Burlington (-16%), Barrie (-15%), Guelph (-14%), and Niagara (-14%). Prices have corrected the least in Saskatoon (-0.6%), Regina (-1.6%), and Moncton (-2.0%), while they haven’t peaked in Calgary.
In Alberta, benchmark prices rose 0.3% m-o-m and 11.9 y-o-y in Calgary, while they declined 1.5% m-o-m and increased +2.4% y-o-y in Edmonton. Edmonton continued to have some of the country’s weakest price increases, while Calgary was amongst the strongest.
In Alberta, despite a moderation in activity in September, the housing market remains robust, with the level of transactions still above their pre-pandemic level. However, the number of transactions has eased in all regions compared to last year’s same month. (see table below for details). Compared to the average level of transactions in 2019, activity in the province increased by 28%, led by Calgary (46%), Central Alberta (+38%), Lethbridge (+26%), and Edmonton (+19%). Activity is the weakest in Medicine Hat (-10%), Grande Prairie (-8%), Fort McMurray (-6%), and Alberta West (-3%).
New listings rose on the month at the provincial level. Compared to the average level of new listings in 2019, new supply in the province increased by 4%, led by Fort McMurray (+14%), Edmonton (+12%), and Calgary (+4%). New listings declined the most compared to 2019 in South Central Alberta (-33%), Medicine Hat (-23%), Alberta West (-22%), and Central Alberta (-17%).
With sales weaker than new listings, many regions have seen an easing of their housing markets. The primary seller’s markets are Calgary, South Central Alberta, Lethbridge, and Central Alberta. The main buyer’s markets are Lloydminster, Fort McMurray, Grande Prairie and Edmonton.
Despite the easing of the housing markets, average house prices have risen in most regions on a 3-month moving average of year-on-year, but at a slower pace. The most significant increase are in Lethbridge (+11.8%), Medicine Hat (+6.9), and Calgary (+4.2%). On the flip side, Fort McMurray (-5.3%), Lloydminster (-4.9%) and Grande Prairie (-2.6%) saw declines in average house prices over the same period.
[1] The month of supply measures how many months is would take at current sales volume and without an increase in listings to bring inventories to 0.
Independent Opinion
The views and opinions expressed in this publication are solely and independently those of the author and do not necessarily reflect the views and opinions of any organization or person in any way affiliated with the author including, without limitation, any current or past employers of the author. While reasonable effort was taken to ensure the information and analysis in this publication is accurate, it has been prepared solely for general informational purposes. There are no warranties or representations being provided with respect to the accuracy and completeness of the content in this publication. Nothing in this publication should be construed as providing professional advice on the matters discussed. The author does not assume any liability arising from any form of reliance on this publication.
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