RBC Economics says lack of homes for sale to “keep prices under intense upward pressure in near term”
RBC Economics doesn’t see Canadian homes becoming cheaper anytime soon.
To the contrary, a report by bank economist Robert Hogue anticipates that residential properties are going to get more expensive, at least in the near term.
It’s all got to do with the lack of homes for sale.
Hogue’s report is partially titled “Wanted: homes for sale”, which basically says everything.
Sifting through October 2021 market reports by real-estate boards across the country, Hogue noted that inventory dropped eight percent.
This brought the number of homes available for sale to 55 percent below “already-thin levels a year ago in some of Canada’s major markets”.
“Tight demand-supply conditions became even tighter,” Hogue wrote.
“So much so that home prices—which appeared to be on a moderating path this summer—gathered more steam,” the RBC economist noted the predicatable result.
Hogue noted that the price of a typical home “accelerated for the second-straight month in Vancouver, the Fraser Valley and Toronto, and for the first time in five months, in Edmonton”.
“Clearly, this housing cycle is far from over and the persistence of bidding wars continues to drive up property values in many parts of the country,” he wrote.
In the Vancouver market, the benchmark price increased year-over-year in October by 14.7 percent, marking its “fastest pace…in more than three years”.
Based on a report by the Real Estate Board of Greater Vancouver, the price of a typical home, which is a composite of all kinds of properties, rose last month to $1,199,400.
Compared to September 2021, the October price represents a 1.1 percent increase.
The REBGV reported that the sales-to-active listings ratio for October 2021 is 43.5 percent.
As for specific property types, the ratio is 33.6 percent for detached homes; 64.4 percent, townhomes; and 46.7 percent, condos.
A balanced market has a ratio of between 12 percent and 20 percent.
It’s the same story with the Fraser Valley Real Estate Board, whose area includes Surrey.
Prices of detached properties, townhouses, and condos registered yearly and month increases in October.
Single-family homes are the most desirable type of property.
Last October, the price of typical detached home in Greater Vancouver increased to $1,850,500.
In the Fraser Valley, the benchmark price for a single-family home last month rose to $1,396,700.
Low inventory is also pushing prices up in Toronto.
In his report, Hogue noted that the benchmark price for all types of homes rose year-over-year in October by more than 24 percent, which was the “fastest pace in four years”.
For Montreal, the RBC economist noted that “price indicators showed a faster rate of increase after easing in the prior four months”.
Calgary, for its part, saw an 8.6 percent annual gain in October 2021, with detached homes “commanding a firmer” 10 percent year-over-year increase.
Hogue wrote: “We expect extremely tight demand-supply conditions will keep prices under intense upward pressure in the near term though we see such pressure easing significantly by the second half of 2022 as markets achieve a better balance.”