According to data from the Canadian Real Estate Association (CREA), February Canadian home sales fell 9.8% from January and were 10.4% lower than in February 2024.
The drop in sales was most pronounced in the Greater Toronto Area but relatively broad-based, with declines in three-quarters of local and almost all large markets, said CREA. See Canadian home sales fell in February amid tariff uncertainty.
Total listings were up 13.1% year over year. The national average price of the homes sold in February was $668,097, down 3.3% from a year ago and -18.2% from the cycle peak of $816,720 in February 2022.
Meanwhile, average asking rents fell 4.8 % nationally to $2,088, marking the fifth straight month of declines, according to a report from Rentals.ca and Urbanation Inc.
Rentals.ca found the February average was the lowest figure since July 2023 and the decline the steepest since April 2021, a year into the COVID-19 pandemic.
Toronto and Vancouver, the areas with the highest populations and shelter costs, face the most significant rent and price declines driven by a flood of newly built condos coming on the market.
These trends are positive for those looking to rent and buy in the months ahead but hard on existing owners and landlords. See, Canadian rental market sees coming boom in vacancy rates:
Falling rents are contributing to difficult times for preconstruction buyers preparing to take delivery of close to 20,000 new condominium apartments that should finish in 2025, all of whom are staring down the barrel of expensive closing costs and rental rates that won’t cover their mortgages.
“It’s ugly,” said Ron Butler, principal broker with Butler Mortgage. “They are all wildly negative cash flow on the average unit, with an 80-per-cent mortgage.” Mr. Butler said that, by a conservative calculation, a mid-sized condo apartment of 550 square feet (with a relatively low cost of $1,100 per square feet) would require that the buyer have somewhere close to a $480,000 mortgage to cover the $600,000 purchase. With a 4.19-per-cent interest rate, that buyer would be looking at $2,334 a month in payments (before property taxes and condo fees) while the average one-bedroom condo is renting between $2,100 and $2,300. If the condo was more expensive per square foot, or the mortgage rate higher, the losses could quickly stack up into the tens of thousands each year.
Yesterday, the U.S. Fed paused its rate-cutting cycle with increased inflation and slower growth forecasts. Canada’s inflation rate jumped to 2.6% from 1.9% in January, surpassing the Bank of Canada’s target for the first time in seven months.
Central banks and the Treasury market are worried about the inflationary impacts of incoming government policy, so they’re less keen to lower interest rates.
Falling shelter costs (28% of Canada’s Consumer Price Index) are disinflationary and will help offset some of the price pressure in other areas. That’s good.
However, much lower prices and rents are needed before affordability can be restored, and that will be painful for many current owners/landlords/lenders/workers and business owners in the highly leveraged economy.
Real estate-led downturns have historically led to the deepest economic contractions.
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