Housing market update: August 2023

Home sales were expected to do the logical thing and drop as a result of the Bank of Canada's recent interest rate hikes. However, the opposite happened, perhaps suggesting that high mortgage rates have been accepted as the new normal.

At the same time, an affordable housing shortage and unyielding demand are keeping single-family home and rental prices high.

• The Canadian Real Estate Association’s (CREA) monthly Multiple Listing Service Home Price Index showed a 2% month-over-month rise in June, bringing the average national home price to $709,218. Prices were down 4.5% year-over-year.

• CREA also reports a small 1.5% increase in seasonally adjusted month-over-month home sales in June. Meanwhile, sales registered the largest year-over-year gain in two years – 4.7% above June 2022. Is it possible that Canadians, expecting a second interest rate rise in July, saw little hope for mortgage rates to go down and decided to buy a house despite high costs?

• The Canada Mortgage and Housing Corporation reports that total housing starts rose 41% to 281,373 from May to June, of which 82% were multi-family units. That’s the biggest month-to-month change in seasonally adjusted starts in 10 years.

• An uptick in construction activity may help stabilise the housing market in the medium term, but the pace isn't fast enough to keep up with demand – as can be seen below in rental stats for the month.

• Rentals.ca reports that the average national asking rent jumped 1.4% from May to June, reaching a record high of $2,042. That is a 7.5% increase year over year, and 20% higher than in June 2021.
  
  
• Rents rose most quickly for smaller, more affordable properties. Average asking rents for studios and one-bed apartments climbed 2.6% and 2.% month-over-month respectively.

• Canada's rapid population growth, fueled by international college students and immigrants who cannot legally buy homes, is driving demand for rental properties and subsequently, costs.

More housing market headlines

Canada's immigration strategy could widen housing supply gap by another 500K units – Storeys

Home prices to end year 8.5% higher, despite Bank of Canada rate hikes: Royal LePage – Financial Post

International student housing crisis demands action – PayProp