It's officially a buyer's market in Toronto, RBC says

A new report says the total value of commercial real estate sales in the Greater Toronto Area in the second quarter rose 43 per cent compared with a year ago. Construction cranes feature on the skyline in Toronto on Wednesday, July 5, 2017. THE CANADIAN PRESS/Frank Gunn

It is officially a buyer’s market in many parts of the GTA as the ratio of sales to new listings continues to slide amid an ongoing housing correction, a new report from a major Canadian bank says.

In a report released on Thursday, RBC assistant chief economist Robert Hogue said that while “demand-supply conditions look reasonably balanced nationwide” that is not the case in many of the country’s most expensive real estate markets in Ontario and British Columbia.

He said that in Toronto, Ottawa, Niagara Region, Hamilton, London, Victoria, Vancouver and the Fraser Valley the ratio of sales to listings is now hovering around 0.40, which is the threshold below where “buyers historically have had more sway on prices.”

Hogue predicts that because of that buyers “will succeed in further reversing some of the earlier outsized price gains in Ontario and BC in the near term,” even if the slide in prices starts to stabilize nationally where the ratio is closer to 0.50.

His report comes just two weeks after Re/Max warned that housing prices in the GTA could drop nearly 12 per cent in 2023.

“It’s no surprise to see some of the larger price declines taking place in these markets,” Hogue said of Ontario and BC. “Since the peak earlier this year, the MLS Home Price Index has plummeted in Cambridge (-21 %), London (-19%), Kitchener-Waterloo (-19%), Brantford (-18%), Hamilton-Burlington (-18%), Kawartha Lakes (-17%), Barrie (-17%), Chilliwack (-16%) and the Fraser Valley (-13%). Property values also fell markedly in the GTA (-12%) and to a lesser extent in the Greater Vancouver Area (-6 %).”

The average price of a home across all property types in the GTA peaked at $1,334,062 in February but has fallen by approximately 19 per cent since then amid an aggressive campaign by the Bank of Canada to hike interest rates.

In his report, Hogue said that while the slowing of the pace of price declines in recent months is likely a sign that the “market downturn has run most of its course” its unlikely that things will “heat up again in short order,” especially in costlier markets in Ontario and BC.

“Higher interest rates and stretched affordability will continue to challenge buyers for some time. This will keep activity quiet for a while longer even if it stabilizes near current levels. We think benchmark prices will keep trending lower until spring,” he warned.

The latest report from RBC comes after the Bank of Canada hiked interest rates for a seventh consecutive time earlier this month.

The central bank has indicated that it will be closely studying inflation and employment data going forward and may be at or close to the end of its rate hiking cycle.

But most experts agree that the cost of borrowing is, nonetheless, likely to remain elevated for at least 2023.

The Bank of Canada’s key overnight lending rate is already at its highest point since 2008.

“We think the massive interest rate hikes and loss of affordability over the past year will hold back buyers into 2023, keeping prices on a downward trajectory in the near term,” Hogue said.