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The Canadian real estate market has been on a downtrend, with inventory levels rising and sluggish sales compounding the issue. According to a recent report by RBC, September data suggests that new listings continue to outpace sales across major markets in Canada, driving inventory higher and extending the cooling trend in the market.
Even though interest rates have fallen—75 basis points since the Bank of Canada’s cuts—buyers remain hesitant to re-enter the market. "Even with 75 basis points worth of interest rate cuts, we aren’t seeing buying activity pick up across the board just yet," writes RBC economist Rachel Battaglia. This is especially evident in Canada’s two most expensive real estate markets: Vancouver and Toronto. Both cities have seen price drops, but buyer activity remains muted due to uncertainties in economic conditions.
Inventory Growth Outpaces Sales
A key factor extending the downtrend in Canadian real estate is the rising inventory in most major markets. Four out of six major cities saw new listings increase faster than sales in September. Markets like Vancouver, the Fraser Valley, and Calgary witnessed growing inventories as sellers outpaced buyers, driving down overall market momentum.
In Toronto, although sales did pick up slightly, the number of new listings still outpaced transactions, a trend that has persisted over the last year. This increased inventory has brought the market closer to a balanced state, with roughly four months of available supply across major cities. The accumulation of unsold properties is contributing to further cooling in the housing market.
On the other hand, markets like Edmonton and Montreal bucked the trend, seeing sales outpace new listings. Edmonton in particular has seen a sharp drop in inventory, contrasting with the national trend.
Central Okanagan Real Estate Market Insights
In addition to national trends, the Central Okanagan region, particularly Kelowna, is also reflecting similar dynamics. According to a report by KelownaRealEstate.com, the Okanagan real estate market is cooling, with inventory levels rising in September 2024. The benchmark price for single-family homes fell to $989,100 in the Central Okanagan, showing a 4.9% decrease year-over-year. Condo sales also saw a slight dip, with the benchmark price at $489,300, down by 1.4%.
With fewer buyers and increasing inventory, it is taking longer to sell homes. In September, the average number of days to sell a property in the Central Okanagan was 49 days, higher than in previous months.
Slower Sales and Future Demand Expectations
While the current slowdown is apparent, RBC's report anticipates that demand will eventually recover. Buyers are expected to re-enter the market once prices stabilize further and financing becomes more attractive. However, this recovery is projected to be a slow process, with expectations that market activity may only pick up in 2025.
Rachel Battaglia emphasized that, despite the current slowdown, demand will likely increase as cheaper credit and lower prices align to make homeownership more accessible. However, buyers remain on the sidelines for now, and the sales recovery, initially expected this year, has been pushed into the future.
Conclusion
The Canadian real estate market is still in a downtrend, driven by growing inventory levels and hesitant buyers. While interest rates have been cut and prices are falling in many regions, the anticipated surge in demand has yet to materialize. Markets like Vancouver, Toronto, and the Okanagan continue to experience rising inventory, which is tempering any immediate recovery in prices or sales volumes. The long-term outlook suggests a gradual recovery, but buyers are likely to wait for further price adjustments and improved economic conditions before returning to the market in significant numbers.
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