June 7, 2022

Toronto, Vancouver, Montreal, Ottawa and Hamilton were among the areas experiencing significant pullbacks in home resale activity in May.  For many of them this represented the third-straight month of decline.  With demand softening, inventories are now on the rise in some markets (including Toronto and Montreal). 


It’s been a dramatic turn of events for the Toronto-area market over the past three months.  High interest-rate sensitivity (due to the area`s steep prices and large mortgage sizes) has put buyers on the defensive in the face of the Bank of Canada’s rate hike campaign.  Home resales have plummeted by a third in the past three months, including a 9. 3% m/m drop in May (on a seasonally-adjusted basis). 


In Montreal, the market has been on a landing path for some time with activity moving below (strong) pre-pandemic levels a year ago and sustaining a modest downward trend ever since.  This brought demand-supply conditions much closer to balance—though inventories remain scarce.  We expect rising interest rates will further moderate demand and keep activity trending lower. 


Whereas in Vancouver, inventories were still down relative to a year ago, they moved higher.  We expect demand to cool further amid rising interest rates.  Vancouver buyers are the most rate sensitive in the country and will be seriously challenged by the Bank of Canada hiking by an additional 100 basis points as we anticipate. 


So as the BOC continues to bring up the rates, perhaps we are reaching a market that is balanced, and finally for everyone. Could this also be the reason why people are moving across the country? What are your thoughts?


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