An “influx” of sellers added new listings to Canada’s tight housing supply in May, but it might not yet be enough to balance a market full of buyers, according to Royal Bank of Canada (RBC).
In a report released Tuesday, RBC assistant chief economist Robert Hogue analyzed early reports from local real estate boards reporting May figures, which he said “unanimously show a material rise in new listings.”
Sellers rushed back to Calgary’s market in May, according to RBC, with seasonally adjusted new listings up 27 per cent month-over-month and home resales rising more than six per cent.
In Toronto, RBC’s analysis shows a 17 per cent jump in new listings month-to-month on a seasonally adjusted basis. In Vancouver, new listings were up 15 per cent month-over-month.
Canada’s spring housing market has shown signs of life in recent months after a sharp cooling tied to higher interest rates. But the Canadian Real Estate Association (CREA) said demand from buyers coming off the sidelines in April was “vastly outpacing” supply from sellers in the resale market.
The sales-to-new-listings ratio jumped up to 70.2 per cent in April, compared with 64.1 per cent in March and the long-term average of 55.1 per cent.
The tight supply means buyers have been competing over a limited number of properties, in turn fuelling a rise in prices.
Hogue wrote that the apparent return of sellers is “good news” for buyers, but he warned the listings seen in May “made only a small dent” in the dearth of supply observed in most markets.
“It will take a further large influx of sellers in the coming months to bring markets into balance,” he wrote.
Hogue went on to say that home prices are expected to keep rising, but they might in turn act as a “stabilizer for the market,” cooling demand from buyers who can’t afford them and incentivizing sellers to return to the fold.
That trend could limit price appreciation, though he noted the risks are weighted more towards higher prices than lower given the “current market strength.”