CANADA HOUSING MARKET: TRADE UNCERTAINTY CLOUDING THE INCOME OUTLOOK AND REDUCES HOUSING DEMAND
SUMMARY
From March to April national sales were essentially unchanged while new listings declined, leading to a marginal rise in the sales-to-new listings ratio over this period. Despite the uptick for this indicator in April, market conditions have significantly eased since the beginning of this year as reflected by the trend decline in this indicator and the rise in the months of inventory almost to its pre-pandemic average.
National housing sales stayed relatively stable from March to April, edging down marginally (-0.1% sa figures), almost halting their constant decline since November 2024 (with a cumulative drop of 19.2%), the time when the upcoming U.S. administration made clear that imports from Canada and other countries would be slapped with steep tariffs and subsequently followed through with this stated intention. In April, sales were near 18% below their 2015-2024 period average level. National sales were -9.8% lower in April (nsa) than their level in the same month of 2024.
New listings declined -1.0% (sa figures) nationally from March to April but are still at relatively high historical levels, exceeding their 2015-2024 period average by about 7.2%. They increased 1.2% (nsa) from the same month in 2024.
Despite the modest uptick in the sales-to-new listings ratio from March to April—from 46.4 to 46.8% (sa figures)—this indicator has been trending towards the estimated threshold for buyers’ favourable conditions since November of last year. Indeed, this indicator has eased considerably since the Bank of Canada started hiking its policy rate in March 2022 as sales trended down at a faster pace (a -38.3% cumulative decline since February 2022; sa figures) than new listings (-5.7%).
Another indicator of national housing market conditions—months of inventory—also eased slightly from March to April rising from 5.0 to 5.1 months (sa figures). Consistent with the cooling observed for the sales-to-new listings ratio, this other indicator of market conditions also exhibited an easing (upward) trend since its record low of 1.6 month in early 2022 and was marginally below its pre-pandemic average of 5.2 months in April. Months of inventory were below their respective long-term pre-pandemic average in most provinces in April, except in Ontario (+2.5 months) and British Columbia (+2.1), with Quebec and the Atlantic provinces showing the largest negative deviations from their long-term average.
The national MLS House Price Index declined -1.2% (sa figures) from March to April, with all unit-types contributing to this decline. From the same month in 2024, this index declined -3.6% (nsa) in April, also reflecting a decline for this price index for all unit-types. Indeed, after having been relatively stable for the whole of 2024, the national (sa) MLS House Price Index declined in each month so far this year with a cumulative 3.3% decline (from sa figures) to April as national market conditions were cooling over this period. The national MLS House Price Index is now at its lowest level since May 2021 and close to 18% below its peak just before the Bank of Canada started hiking its policy rate in March of 2022.
In April, sales weakened in just above 60% of the markets we track while new listings declined in more than 70% of them. The sales-to-new listings ratio eased (declined) in 45% of these markets. There are now 15 of these markets in buyers’ favourable conditions compared to only 4 last December.
Above 10% declines in sales from March to April were observed in Brantford (-14.5%; sa figures) and Saskatoon (-12.5%). The following centres witnessed a more than 10% rise in their sales over this period: Sudbury (16.9%), Kitchener-Waterloo (16.3%), London (11.2%), and Quebec City (10.2%).
Sharpest monthly declines in new listings—above 10%—were observed in Peterborough (-15.9%; sa figures), Brantford (-11.4%) and Lethbridge (-10.4%). Sharpest increases in new listings from March to April were observed for Quebec City (+8.4%) and Sudbury (+7.5%).
IMPLICATIONS
Evidence that housing demand is cooling continue to pile up. This is not surprising given slower population growth with the revision to immigration targets announced by the federal government last Fall and, more importantly, from elevated uncertainty potential buyers are currently facing with regards to their future employment and income conditions with the ongoing trade tensions triggered by the new U.S. administration. These tensions are obviously preventing the Canadian housing market to firm up, despite the economy and housing markets likely having completed their adjustment to the rising cycle for interest rates and started reacting to their normalization cycle.
Until this trade-related uncertainty wanes with a clearer future path for these tariffs and how they will potentially affect Canada’s economy and income conditions for potential buyers, we do not expect a meaningful recovery in housing demand and prices in Canada. This elevated context of uncertainty can of course last for an extended period with uncertain duration, meaning the average potential buyer will likely stay on the sideline for this unknown duration.
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