Canadian banks have been divided on where the market will head, but they’re all seeing the same thing – inventory rising faster than sales. Four of the Big Six commented on May sales across Canada. All four banks stated the rise in sales last month sounded more impressive than it was. The bigger common concern appeared to be inventory increased faster than sales, which will cool price action later this year.

Royal Bank of Canada (RBC)

RBC focused on low sales volumes, higher listings, and expects downward pressure on prices. Sales bounced higher, but they noted “activity was still 40% to more than 50% below year-ago levels in most major markets.” The increase in May only made up “one-fifth of the drop in March and April in Vancouver and Toronto, and closer to one-quarter in Ottawa. The bank expects “slower immigration” will soften a recovery in sales.

Canada’s largest bank expects the slower sales volume will meet with higher listings, pushing prices lower. The bank notes, “there are early signs demand and supply are decoupling.” New listings and sales had fallen at roughly the same pace in March and April, but listings increased faster in May. They expect this trend to continue, adding “we believe downward price pressure will build in most markets in the coming months.”

Bank of Montreal (BMO)

BMO economists observed the same issues with sales and inventory, but had a slightly different take on prices. In regards to sales they note, “[it’s] easy to post gaudy percentage increases coming off what was effectively a shut-down market in April.” Adding “new listings jumped even faster than sales.” They add it’s “still too early to judge the ultimate impact on prices,” but entertain it’s possible they are flat instead of falling. Although stated flat prices “…would be pretty atypical for such a cyclical sector…”

Scotiabank

Scotiabank was less detailed on their observations, mentioning positive movements for both sales and new listings. They note “both gains were the strongest ever recorded.” However, relative to pre-lockdown February – “sales and listings were down 42% and 36%, respectively.” They specifically highlight three warnings to keep an eye out for: A second wave of the virus, withdrawal of fiscal support and mortgage arrears, and population growth – noting the decline of immigration.

TD Canada Trust (TD)

TD also wasn’t impressed with the sales recovery, and noted the higher volume of sellers returning to market. They note. “ [sales] only retraced about a third of activity lost between February and April, and sales remained at multi-year lows.” Adding that sellers returned “en masse in May, as national new listings climbed at an even greater rate than sales…” They expect buyer expectations can still coast, and squeeze out “gains for at least another few months.” However, they expect the market will cool into the later part of the year, and into 2021.

Markets are notoriously difficult to read when transaction volumes are this low. All four banks note sellers are returning faster than buyers. Just a few weeks ago, some banks were still stating they believed the market wouldn’t be impacted by the pandemic. All Big Six banks are see the market slowing later this year, and forecasts will likely be updated to reflect that. If you’re keeping track, that means there’s only a handful of real estate brokerages are forecasting a positive outlook.

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