Canadian Housing Market Rebounds: Sellers Regain Control as RBC Predicts Turnaround in Spring 2023

A recent report from RBC suggests that the housing correction in Canada, which the bank once described as ‘historic,’ appears to have come to an end. According to RBC Senior Economist Robert Hogue, the spring of 2023 seems to be the turning point for Canada’s housing market after a year-long slump. Home sales across the country increased by 11.3 percent month-over-month in April, and the average benchmark price rose in approximately three-quarters of the bank-tracked markets.

In Toronto, for instance, prices increased by 2.4 percent to an average of $1.1 million, while Hamilton saw a 5.4 percent month-over-month increase and Kitchener-Waterloo experienced a 3.9 percent rise. The report highlights that the signs of a turnaround in Toronto and Vancouver, which were tentative earlier, were confirmed in a significant way in April. Home resales in these cities jumped by 27 percent and 25 percent month-over-month, respectively, rolling back approximately 25 percent of the previous correction. The Bank of Canada’s decision to pause its aggressive rate hike campaign seems to have restored buyer confidence in these markets.

Although the average price of a Toronto home was still 7.8 percent lower year-over-year in April, it has now increased for two consecutive months. RBC had previously stated in December that the Greater Toronto Area (GTA) had become a buyer’s market, despite the national demand-supply conditions appearing balanced. However, the recent data indicates a change in this trend.

RBC economists were surprised by the widespread market strength in April, as they expected it to take longer for the market to regain momentum. The loss of affordability in the past year was believed to keep buyers cautious, especially first-time buyers. However, factors such as high immigration levels and a strong rental market seem to be driving homebuyer demand. As a result, RBC suggests that home prices could continue to increase, potentially exceeding the gains seen in April.

In February 2022, the average price of a Toronto home across all property types reached a peak of $1,334,062 before dropping to a recent low of $1,037,542 due to efforts to raise borrowing costs. However, in April, the average price of a GTA home rose by approximately 11 percent from its lowest point, reaching $1,153,269.

Overall, the report from RBC indicates that sellers are now in a favorable position in most major housing markets across Canada, as the market appears to have rebounded from the previous slump.