ANOTHER RECORD HIGH
SUMMARY
With a 6.2% (sa m/m) gain, Canadian home sales reached a new all-time high in August 2020, building on the record heights achieved in July. That lifted purchases more than 20% above levels in February—the last month before COVID-19 lockdowns took effect. Sales exceeded pre-pandemic heights in 28 of the 31 cities for which we maintain data, with 10 centres at record levels. New listings climbed a hefty 10.6% (sa m/m) to push the national sales-to-new listings ratio down to 69%—still broadly indicative of demand-supply conditions favouring sellers. Listings sat 17% above pre-virus levels across Canada, and have fully recovered in a majority of cities. Bolstered by that tightness, the composite MLS Home Price Index (HPI) rose 9.4% (nsa y/y), its steepest gain since 2017.
Southern BC centres experienced significant sales gains in the month, with Toronto also witnessing double-digit increases. In both Vancouver and Toronto, the pace of new listings growth outstripped that of purchasing volumes and accelerated versus July. That helped erode the short-term supply shortfall that had built up in the preceding months, throwing both centres into balanced market territory in August, though earlier tightness supported a pickup in y/y MLS HPI gains. Results were more mixed in the broader Ontario Greater Golden Horseshoe (GGH) region. Following softer sales in August, Hamilton-Burlington and Guelph purchasing volumes sit below February levels after recouping early-year losses in July.
Montreal and Ottawa likewise witnessed listings increases in excess of the growth in home purchases, with similar movements across much of the Maritimes. Mirroring demand-supply imbalances before the pandemic and exacerbated during the reopening period, however, Montreal witnessed its steepest nsa y/y benchmark MLS HPI increase since 2003. Meanwhile, Ottawa’s benchmark MLS HPI increase approaching 20% and Moncton’s advance of more than 12% (both nsa y/y) were both records.
With the exception of Lethbridge, cities in Canada’s net oil-producing regions witnessed more muted sales and listings activity. Purchases climbed in the 2.5–3% range (sa m/m) in Saskatoon, St. John’s, and Edmonton, and fell in Calgary and Regina, while new listings only increased in St. John’s. However, sales gains during the reopening period appear to be putting modest upward pressure on benchmark MLS HPIs in Alberta and Saskatchewan.
From a composition perspective, single-family homes thus far appear to be driving the bulk of price gains in a number of large cities. In Toronto, Montreal, Vancouver, Calgary, and Edmonton, recent nsa y/y MLS HPI gains for single-family units have outpaced those in benchmark prices.
IMPLICATIONS
The persistently strong rebound in housing market activity indicates that there was still plenty of pent-up demand to be unleashed following COVID-19 lockdowns. It also lends further support to the argument that Canada is in the midst of a strong V-shaped recovery, though the pace of gains appears to be moderating with the post-lockdown reopening period now largely complete.
This month’s catchup in new listings implies more modest price gains in the coming months. Last month, we highlighted that sales initially recovered more quickly than new listings across a range of centres, generating some supply-demand imbalances. While those initial movements still appear to be supporting prices, last month’s jump in listings—whether a simple adjustment of supply to the strength of demand or a reflection of household stress—merits further monitoring: On the other hand, coincident sales and listings increases in Southern BC and the GGH suggest that limited availability had been holding back existing home purchases. In those regions, additional supply-side gains could lend support to sales activity in the coming months.
Signs of regional housing market disparities are increasingly emerging. Sales and listings gains in GGH and Southern BC cities—in the midst of strong population and employment gains plus elevated housing absorption rates pre-pandemic—have generally outpaced the national mean in the last two months. By contrast, centres in the net oil-producing regions—grappling with an inventory overhang accrued since the last commodity price downturn—have seen sharper sales activity decelerations, with some losing ground in August. Like most forecasters, we anticipate challenging economic conditions for Alberta, Saskatchewan, and Newfoundland and Labrador as the pandemic continues, which may exacerbate this trend.
Risks to the economic outlook remain—notably continued weakness in immigration amid border closures and apprehension about international travel, the timing of policy support withdrawal, and a second virus wave. The possibility of a resurgence in COVID-19 infections in particular looks more likely than at any point during the reopening process, with caseloads trending higher in most Canadian provinces.
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