Inventory continues to be the lynchpin of the Canadian housing market. The pattern of heating and cooling housing markets emerges time and time again, and it is directly linked to our issues with supply and the inability of governments at all three levels to get shovels in the ground across our nation.

Recent stock market volatility and bank failures south of the border that have sent shockwaves throughout the financial markets may provide an additional boost for Canadian housing markets as investors turn to the security of bricks and mortar yet again.

A lack of available homes listed for sale have served to prop-up housing values across the country, despite softer overall demand. After double-digit declines from peak to trough in the second and third quarters of 2022, prices have held up relatively well in major centres. The year-over-year value of luxury homes in markets such as Calgary and Moncton increased, while Toronto, Hamilton-Burlington, Ottawa and Vancouver have fallen just short of peak Q1 levels. In an effort to maintain supply and curtail demand from foreign buyers, the government implemented its Prohibition on the Purchase of Residential Property by Non-Canadians Act on January 1, 2023, which had unintentional consequences on the construction of purpose-built residential rentals and mixed-use projects across the country, as well as sports and entertainment figures and corporate transfers throughout the first quarter. Amendments to the Act, effective March 27, 2023, included:

•Enabling more work permit holders to purchase a home to live in while working in Canada.

•Repealing existing provisions so the prohibition doesn’t apply to vacant land; provide an exception for development purposes.

.•Increasing the corporation foreign control threshold from 3% to 10%.

The bulk of purchasers, however, remain local in most Canadian markets, with the exception of some out-of-province activity in the first quarter. Centres such as Kelowna on the west coast and in markets throughout Canada’s east coast have seen an influx of buyers driven largely by lifestyle, as strong value for the dollar proved enticing to move-up purchasers. After a tumultuous 2022, cautious optimism is growing in major centres across the country. The ripple effect is starting to work its way through the housing market, with all segments working in tandem. Competitive offers, once again on the table from St. John’s to Vancouver, are becoming increasingly common, especially in Toronto where nearly 20% of freehold homes over $3 million sold at or above list price in Q1 2023. Turn-key and renovated properties remain most sought after, as higher building costs have dampened the appetite for new construction to some extent. While softer, due to limited inventory in many markets, the uber-luxe segment is starting to pick up in line with overall activity in the upper end. Inventory, at this level, however, is even more scarce.