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Economic News

Canada: Home Sales Jump While Housing Starts Slump in May

June 15, 2023
Randall Bartlett
Senior Director of Canadian Economics


  • Existing homes sales rose 5.1% in May on a seasonally-adjusted basis, following an 11.3% advance in April, for the fourth consecutive month. And while home sales were only 1.4% above the May 2022 level, this is a dramatic improvement over the 19.6% year-over-year decline posted in April.
  • May sales were up in over 70% of local markets in Canada, including some of the country’s largest: the Greater Toronto Area, Montreal, Greater Vancouver, Calgary, Edmonton, and Ottawa.
  • Meanwhile, the average sale price of an existing home rose by 2.7% to $715K in May—the fourth monthly advance in a row—and was 3.2% above the May 2022 level. After falling over 20% from its February 2022 peak through January, the average sale price recovered about half of that lost ground as of May.
  • Looking to the composite benchmark price, which adjusts for market composition, the purchase price of a home was up 2.1% in May, the second consecutive gain following 12 monthly declines in a row. That said, it’s still down 8.5% from a year ago.
  • The number of new listings moved ahead again in May, rising 6.8%. When paired with the increase in sales, the sales-to-new listings ratio fell to 67.9 from 69.0 in April. This is the third straight month that the housing market was squarely in sellers’ territory.
  • At the same time, housing starts took a big step back in May, falling 23% to 202K from 261K in April. Urban starts led the decline, falling 24% on the back of a 30% drop in multi-unit starts. Meanwhile, single-detached urban starts rose by 6% in the month. At 240K, the six-month moving average in housing starts has fallen to the lowest level since November 2020.


If anyone thought April’s blowout advance in home resales was a fluke, the print in May should put that thought to bed. Surging population growth, a tight labour market, falling price-to-rent ratios and, at least until recently, the hope of lower interest rates on the horizon all provided a tailwind to housing demand in the first five months of 2023. And with housing starts trending lower, a dearth of new supply should mean further support to prices and erosion of affordability ahead.


The resurrection in resale activity in April and May supports the Bank’s decision to restart the rate-hike engine last week. With so many fundamental factors pushing up demand, the only thing that could put a chill on the red-hot Canadian housing market is higher rates. Hence, we think growth in resale activity will likely cool in the months ahead. But given the trend in housing starts is continuing to track lower, a lack of sufficient supply to meet demand will only worsen the affordability crisis, putting upward pressure on home prices and rent alike. High borrowing and input costs are challenging new builds, and there is little relief in sight.

However, if all you have is a hammer (the Bank of Canada’s policy rate), everything looks like a nail. As such, until we see meaningful progress in inflation moving toward the Bank of Canada’s 2% target, bumper housing market data provides further support to our view that the Bank is likely to hike again in July and keep the door open to further rate hikes as needed.