CANADA’S HOUSING MARKET | January 7, 2020

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January 7, 2020

Toronto housing market became more expensive, Vancouver more active in December

2019 ended on a much stronger note than it started for two of Canada’s largest housing markets. Early real estate board-level results

showed December home resales rising well above year-ago levels in both the Toronto (up 17.4%) and Vancouver (up 88.1%) areas.

This marked an impressive turnaround from the very weak conditions prevailing at the start of 2019. There ’s been increasing evidence

since then that buyers have adjusted to earlier policy changes—including the mortgage stress test. Modest declines in mortgage rates

over the first half of the year also helped spur demand. The bigger issue now is low inventories. Very tight demand-supply conditions

in December have led to the strongest rise in property values (+7.3% year-over-year) in Toronto since November 2017. Vancouver’s

benchmark price was still down from a year ago (-3.1% in December) but not for much longer—it’s been rising month-over-month over

the last five months. Reports from other real estate boards point to generally solid results in December. Home resales rose from a

year ago in Ottawa (up 15.3%), Edmonton (up 9.9%), Calgary (up 8.3%) and Victoria (up 7.2%). There were further signs that price

declines are easing gradually in Calgary and Edmonton.

The main story in the Toronto area throughout the fall of 2019 has been shrinking inventories. This was especially the case in Decem-

ber with new listings falling more than 18% from a year ago, and active listing plummeting 35%. The dearth of supply is making buy-

ers’ property search more challenging. Home resales have levelled off since September on a seasonally-adjusted basis despite de-

mand remaining strong. By our count, home resales fell by approximately 3% between November and December. Because new list-

0

5

10

15

20

25

30

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Unadjusted

Moving average

Thousand units, NSA

Active listings: Toronto area

Source: Toronto Real Estate Board, RBC Economics

0.00

0.10

0.20

0.30

0.40

0.50

0.60

0.70

0.80

0.90

1.00

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Seasonally ajusted

Toronto-area sales-to-new listings ratio

Source: CREA, RBC Economics

seller's market

buyer's market

balanced market

December

0

20

40

60

80

100

120

140

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Thousand units, seasonally ajusted annual rate

Toronto-area home resales

Source: CREA, RBC Economics

December

Robert Hogue

Senior Economist | 416-974-6192 | robert.hogue@rbc.com

-20

-10

0

10

20

30

40

2013 2014 2015 2016 2017 2018 2019

Vancouver

Toronto

Year-over-year % change

MLS Home Price Index

Source: CREA, TREB, REBGV, RBC Economics

July 25, 2016: BC government announces 15% foreign buyer tax in Metro Vancouver, effective Aug. 2, 2016.

April 20, 2017: Ontario government announces housing action plan that includes a non-resident buyer tax of 15%

effective immediately.

February 26, 2018: BC budget announces rise in

foreign buyer tax to 20% and new

non-resident speculator tax.

January 1, 2018: OSFIimplements new B-20 guideline for mortgage lending

that calls for stress testing all new uninsured mortgages.

CANADA’S HOUSING MARKET | January 7, 2020

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ings fell even more sharply during the month, demand-supply

conditions tightened further to a degree unseen since early-2017.

So it was no surprise that property values got hotter. In fact, odds

are they will continue to heat up at an accelerating rate in the

months ahead with sellers squarely in the driver’s seat.

The eye-catching, 88% y/y surge in home resales in the Vancou-

ver area in December says as much about the depth of the

slump in December 2018 as the current, more buoyant state of

affairs. A year ago, Vancouver’s market was fast approaching its

lowest point since the Great Recession, which set a very flattering

comparison basis. Still, confidence in the market clearly has re-

turned. All the recent policy and regulatory changes appear to be

in buyers’ rear view mirror now. We estimate home resales grew

for a sixth-straight month in December on a month-over-month basis, rising by more than 4.5% from November. New listings haven’t

kept up. The market balance is quickly shifting in favour of sellers. Home prices are poised to maintain an upward trajectory in the

period ahead—quite possibly rising above year-ago levels by the spring (or even earlier). After seeing some affordability reprieve over

the past couple of years, Vancouver buyers will again find harder to achieve their home ownership dream in 2020.

The material contained in this report is the property of Royal Bank of Canada and may not be reproduced in any way, in whole or in part, without ex-

press authorization of the copyright holder in writing. The statements and statistics contained herein have been prepared by RBC Economics Research

based on information from sources considered to be reliable. We make no representation or warranty, express or implied, as to its accuracy or com-

pleteness. This publication is for the information of investors and business persons and does not constitute an offer to sell or a solicitation to buy secu-

rities.

0

10

20

30

40

50

60

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Thousand units, SAAR

Home resales: Vancouver area

Source: CREA, RBC Economics

December

0.00

0.10

0.20

0.30

0.40

0.50

0.60

0.70

0.80

0.90

1.00

1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019

Seasonally adjusted

Vancouver-area sales-to-new listings ratio

Source: CREA, RBC Economics

seller's market

buyer's market

balanced market

December

0

5

10

15

20

25

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Unadjusted

Moving average

Thousand units, not seasonally adjusted

Active listings: Metro Vancouver

Source: Greater Vancouver Real Estate Board, RBC Economics