Economic commentary provided by Alberta Central Chief Economist Charles St-Arnaud.
Bottom line:
Housing activity improved in August for a fifth consecutive month. The increase in sales is mainly due to higher sales in Quebec, BC and Alberta, while activity in Ontario was flat. With sales activity lower and inventories higher over the past year, house prices remained under pressure, declining by 3.5% y-o-y.
The improvement in housing activity happened despite the elevated uncertainty caused by the US tariff threat and the deterioration in the labour market. Improved consumer confidence due to the receding extreme uncertainty in recent months is likely supporting the modest recovery in housing activity. Moreover, signs that the economy may be stabilizing suggest that the economy is no longer deteriorating.
Nevertheless, uncertainty is expected to remain elevated, suggesting that any improvement in the housing market in the coming months will remain modest. However, expected cuts by the Bank of Canada to lower interest rates and better affordability, thanks to declining prices in many areas, could provide support in some markets. The main risk to the housing market remains a deterioration of the labour market leading to significant.
In Alberta, housing market activity remained robust by historical standards, despite some continued slowing in recent months. We note that Edmonton continues to outperform Calgary. Strong migration into Alberta, combined with affordability, is a significant support for housing activity and prices compared to other parts of the country.
Activity in the Canadian housing market rose by 1.1% m-o-m seasonally-adjusted in August. The number of transactions was 40.7k, 5.7% higher than for the same month in the preceding years. The increase in activity in August was mainly the result of increased activity in Newfoundland (+10.6% m-o-m), Nova Scotia (+4.7% m-o-m) Quebec (+3.1% m-o-m), BC (+2.4% m-o-m), and Alberta (+2.2% m-o-m). On the flip side, activity was lower in New Brunswick (-13.8% m-o-m), PEI (-5.6% m-o-m), and Saskatchewan (-3.0% m-o-m).
Compared to the average level of 2019, the number of transactions is about 0.7% lower nationally but continues to be well above its pre-pandemic level in Newfoundland (+52%), Saskatchewan (+50%), and Alberta (+49%). On the other hand, activity is still below pre-pandemic levels in Ontario (-18%), Nova Scotia (-7%), BC (-6%), and New Brunswick (-5%).
New listings rose 2.6% m-o-m seasonally-adjusted in August and were 8.2% higher compared to the prior year. The increase in new listings was led by Quebec (+6.4% m-o-m), Nova Scotia (+6.0% m-o-m), Ontario (+2.7% m-o-m), and BC (+2.4% m-o-m). On the flip side, new listings decreased in PEI (-3.3% m-o-m), Newfoundland (-1.9% m-o-m) and New Brunswick (-1.9% m-o-m).
While sales activity was weaker than new listings in many regions, the month-of-supply measure[1] was unchanged 4.4 months nationally, slightly below its 2019 level. Based on this measure, inventories declined the most in Newfoundland, Nova Scotia, Ontario, Alberta, and BC, while they increased in New Brunswick and PEI.
Inventories are the lowest in Manitoba (2.1 months), Alberta (2.9 months), and Saskatchewan (3.1 months), while they are the highest in BC (6.6 months), PEI (6.6 months), and Newfoundland (4.8 months).
Compared to 2019, inventories in Ontario are 2.0 months higher, 1.1 months higher in BC, and 1.0 months in PEI, while they remain well below in Newfoundland (-10.5 months), Saskatchewan (-7.5 months) and Alberta (-4 months)
With a month-of-supply at 2.9, Alberta’s housing investory remains well below historical standards.
With higher inventories rising faster than sales compared to last year, the MLS House Price Index decreased 0.1% m-o-m in August. Compared to the previous year, house prices nationally were lower by 3.5% y-o-y.
The biggest monthly price increases were in Newfoundland (+1.3% m-o-m), Nova Scotia (+0.8% m-o-m), New Brunswick (+0.8 m-o-m) and Saskatchewan (+0.7% m-o-m). Prices decreased the most in PEI (-1.3% m-o-m), Quebec (-0.4% m-o-m), and BC (-0.2% m-o-m).
On a y-o-y basis, Ontario (-6.8% y-o-y), BC (-3.1% y-o-y) were the only provinces where prices declined. Prices increased the most in Newfoundland (+12.3% y-o-y), Quebec (+7.9% y-o-y), Saskatchewan (+7.9% y-o-y), and New Brunswick (+6.3%).
Compared to their recent peaks in early 2022, prices have declined by 17.9% nationally. However, prices are still about 26% higher than in January 2020 on the eve of the pandemic. Compared to their recent peak, prices dropped the most in Ontario (-24.2%) and BC (-10.7%). On the flip side, prices have increased significantly in Newfoundland (+25.6%), New Brunswick (+20.5%), Saskatchewan (+14.6%), and Alberta (+12.6%).
In Alberta, benchmark prices eased 0.1% m-o-m and were flat compared to last year. However, this masked a divergence between its main metropolitan area. Prices in Calgary declined 0.3% m-o-m and 2.6% y-o-y, while prices in Edmonton continued to increase (+1.1% m-o-m, +5.3% y-o-y). Edmonton has been outperforming relative to Calgary for some months. Strong population growth and better affordability could explain the better performance in Edmonton.
In Alberta, sales activity declined 5.6% y-o-y in August, but the housing market remains robust with transactions still well above their pre-pandemic level (+49%). (see table below for details).
On a 3-month moving average of the year-on-year, transactions decreased 6.7% in the province, with declines in Calgary (-13.3%), Medicine Hat (-3.8%), Edmonton (-3.5%), and Fort McMurray (-3.5%). On the flip side, activity was higher in Grande Prairie (+8.2%), Alberta West (+8.1%), and Lloydminster (+3.7%).
Compared to the average level of transactions in 2019, activity in the province increased by 49%, led by Central Alberta (+65%), Edmonton (+63%), South Central Alberta (+52%), and Grande Prairie (+49%).
New listings were higher than last year at the provincial level (9.9%). However, there are some significant differences regionally. On a 3-month moving average of the year-on-year, new listings increased the most in Edmonton (+15.1%), South Central Alberta (+13.1%), Calgary (+9.0%), and Central Alberta (+6.7%). New listings were lower over the same period in Fort McMurray (-13.6%).
With sales below new listings in June, some regions saw an easing in market conditions. The primary seller’s markets and Grande Prairie, Lethbridge, Medicine Hat, and Alberta West. The main buyer’s market is Calgary.
Average house prices in the province increased by 2.8% on a 3-month moving average of the year-on-year. Prices are higher in all regions led by Lloydminster (+13.7%), Grande Prairie (+10.5%), Lethbridge (+10.5%), and Medicine Hat (+9.4%). Prices increased the least in Alberta West (+0.3%), South Central Alberta (+0.5%), and Calgary (+1.5%).
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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.