What Happened

RBC Economics released a report on Thursday stating that the Canadian housing market downturn is not yet complete, with assistant chief economist Robert Hogue noting that the market bottom is still some ways away. The analysis comes as the Bank of Canada has hiked its key lending rate by three percentage points since March, with an additional three-quarter-point increase widely expected by year-end to lift the overnight rate to four per cent. These monetary policy shifts are exacerbating affordability challenges, leaving buyers in an exceptionally tight squeeze facing the worst conditions in large parts of the country. Hogue emphasized that the negative impact of higher interest rates is still running its course, particularly depressing values for higher-priced single-detached homes first. Despite the national headwinds, regional disparities remain stark, with Calgary’s market staying above pre-pandemic levels while Montreal’s correction accelerates. Meanwhile, Vancouver’s price declines are moderating, though affordability remains extremely poor, requiring 90.2 per cent of median household income to carry a home. RBC’s Home Ownership Poll further reveals that 64 per cent of Canadians believe there is no perfect time to buy, highlighting the paralysis caused by economic uncertainty.

Why It Matters

The ongoing monetary tightening and persistent affordability crisis are fundamentally altering buyer behavior and market dynamics across Canada. With the Bank of Canada expected to raise rates further, the cost of borrowing continues to suppress demand, particularly in the luxury segment where single-detached homes are seeing the sharpest value declines. This environment forces potential buyers into a defensive posture, delaying purchases as they wait for clearer signals on interest rates and price stabilization. The lack of a clear market bottom creates uncertainty for both consumers and industry stakeholders, complicating planning for new developments and financing. Furthermore, the divergence between regional markets means that national averages may mask significant local distress or resilience, making location-specific analysis critical for anyone navigating the current landscape. The poll data indicating that most Canadians see no perfect time to buy underscores a broader loss of confidence in the housing market as a reliable wealth-building tool in the short term.

Local Vancouver / Burnaby Context

In Vancouver, the housing market is experiencing a moderation in price declines, yet affordability remains critically strained. According to RBC Economics, it would take 90.2 per cent of the median household income to carry a home in the city, a figure that highlights the extreme pressure on local buyers. This affordability barrier is a key driver of the defensive stance taken by potential purchasers in the region. While the broader national market grapples with the lagging effects of interest rate hikes, Vancouver’s specific dynamics are influenced by its high baseline prices and limited supply. The city’s market is not immune to the national trend of depressed values in the single-detached segment, but the moderation in declines suggests a potential stabilization phase, albeit at a high cost. For Burnaby and the Greater Vancouver area, this context is vital for understanding why sales activity may remain subdued despite any potential easing in broader economic conditions. The local market’s resilience is often tied to its status as a global safe haven, but the current affordability metrics indicate that local income growth is not keeping pace with carrying costs.

Market Impact

The continued rise in interest rates is likely to further depress home prices, particularly for higher-priced single-detached properties, as buyers retreat from the market. This trend may lead to increased inventory as sellers adjust to the new reality of higher borrowing costs. Conversely, the condo market in the Greater Toronto Area is seeing sustained demand, supported by lower relative prices and investor interest in the rental market. In Calgary, the market remains robust due to a stronger economy and in-migration, providing a contrast to the national downturn. Montreal is facing an accelerating correction, with prices on the Island of Montreal now falling below year-ago levels, signaling deeper distress in that region. The overall impact is a fragmented market where liquidity varies significantly by region and property type, with buyers holding more power in segments where demand has cooled sharply.

Builder / Developer Perspective

Builders and developers face a challenging environment as higher interest rates increase financing costs and reduce buyer demand, particularly for high-end single-detached homes. The uncertainty surrounding the market bottom complicates pre-sale strategies and project feasibility, as buyers are hesitant to commit to new purchases. In regions like Montreal, where the correction is accelerating, developers may need to adjust pricing and product mixes to align with current demand. Conversely, in Calgary, the stronger market conditions may offer more stability for new developments, but builders must still account for potential national economic shifts. The need for affordability in markets like Vancouver requires developers to focus on density and efficient unit types, such as condos, to meet buyer needs while managing construction costs. Financing remains a key concern, as lenders may tighten criteria in a rising rate environment, impacting project viability.

BurnabyHouse Insight

The RBC report underscores a critical inflection point for Canadian housing, where the lagging effects of monetary policy are finally manifesting in tangible market distress. For local readers, the key takeaway is the divergence between national narratives and regional realities; while Calgary and parts of the GTA condo market show resilience, markets like Montreal and high-end segments in Vancouver are facing significant headwinds. The 90.2 per cent income-to-carry ratio in Vancouver is not just a statistic but a barrier that defines the market’s current state, limiting the pool of qualified buyers to those with substantial equity or income growth. This environment favors cash-rich buyers and investors with access to capital, while squeezing out first-time purchasers. The market bottom is not a single event but a process, and until interest rates stabilize and affordability improves, the current dynamic of defensive buying and price moderation will likely persist.