Canadian Housing Market Sees Surge in Sellers Amid Rising Interest Rates

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The Canadian housing market has witnessed an influx of sellers in recent months, particularly in September, with a surge in new property listings across major markets. This increase in supply is attributed to rising borrowing costs driven by higher interest rates, according to a report by Robert Hogue, assistant chief economist at RBC Economics. While higher interest rates have led to more sellers entering the market, they have simultaneously discouraged buyers and weakened overall demand, resulting in a more balanced housing market. This shift is most noticeable in Ontario and British Columbia, with cities like Toronto, Vancouver, and the Fraser Valley favoring buyers or being close to a buyer's market.

The report notes a slight decline in prices, with the MLS Home Price Index falling month-over-month for Toronto, Vancouver, and the Fraser Valley in August and September. Conversely, Calgary saw price increases while maintaining a tight demand-supply balance. Hogue anticipates this trend to continue in the coming months, as high interest rates, ongoing affordability challenges, and economic uncertainty pose significant obstacles. A notable recovery in the market is not expected until interest rates begin to decrease in 2024.

In the Greater Toronto Area (GTA), buyers, who previously faced low inventory, now have more housing options available as new listings increased by 11% in September. However, sales declined by 1.8% month-over-month, primarily due to factors such as low affordability, higher interest rates, and growing economic uncertainty. This increased supply, coupled with weaker demand, is contributing to a gradual reduction in property prices, with the Home Price Index declining by approximately 0.2% in August and 0.8% in September. Buyers are expected to hold a stronger bargaining position in the near term.

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