Housing Market Risks are Easing: RBC

Housing Market Risks are Easing: RBC

After reaching overheated territory earlier this year, risks to the country’s housing market are now easing as prices and activity moderate.

That’s the assessment from RBC Economics’ latest Housing Health Check, which noted that “still-solid” demand—particularly in the resale market—and low inventories are keeping the odds of a price collapse low.

“This winters frenzy raised significant concerns that extrapolative price expectations would drive up property values to excessive levels,” the report reads. “With the market shifting to a more sustainable pace, the risk of an uncontrolled upward price spiral has considerably diminished. We expect prices to flatten by early next year.”

Despite prices easing over the summer, the sharp run-up since last year has worsened affordability, with the situation remaining “severe” in Vancouver and Toronto, while the issue is becoming “more problematic” in Montreal.

Here’s an assessment of how Canada’s four largest housing markets are faring:

Toronto

Activity in Canada’s largest housing market has been slowing since the spring. A drop in listings has kept the market “extremely tight” and prices under upwards pressure, RBC noted.

“Overstretched affordability remains a significant issue and top vulnerability,” the report said. “A dip in population growth poses a risk though will be shortlived.”

Vancouver

The city saw a spike in activity over the winter that has since been partly reversed. Despite lower sales, demand remains high for limited inventory, which has maintained support for prices. “Despite improving since late2018, housing affordability is exceedingly poor and a major source of vulnerability,” RBC said.

Montreal

The market saw a moderation in the existing home market to more sustainable levels over the summer. Despite the slower pace of price appreciation, RBC sees little risk of a sharp decline in prices as it remains a seller’s market. “Affordability is a moderate but growing strain. Elevated rental apartment construction warrants close monitoring.”

Calgary

Calgary’s housing market experienced a “solid” recovery over the past year due to a drop in inventory of existing and newly built homes, which in turn led to a rise in prices. “Demandsupply conditions are in fact the tightest theyve been in years, which points to further price gains in the near term,” the report noted.

The post Housing Market Risks are Easing: RBC appeared first on Canadian Mortgage Trends.

Steve Huebl

Steve Huebl is a graduate of Ryerson University's School of Journalism and has been with Canadian Mortgage Trends and reporting on the mortgage industry since 2009. His past work experience includes The Toronto Star, The Calgary Herald, the Sarnia Observer and Canadian Economic Press. Born and raised in Toronto, he now calls Montreal home.

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