Treasury
Canada's Housing Market Stalls Amid Mounting Headwinds in March, Says National Bank
Canadian home sales remained stable, down 0.1% month over month, from February to March, following four consecutive monthly declines, said National Bank of Canada.At the regional level, monthly declines were registered in six provinces: Prince Edward Island (-16.6%), New Brunswick (-9.2%), Alberta (-5.2%), Nova Scotia (-3.5%), Manitoba (-0.5%) and British Columbia (-0.4%). Sales increased in Quebec (+0.4%), Ontario (+1.8%), Saskatchewan (+9.6%) and Newfoundland (+10.0%).With home sales being unchanged in March, activity levels remain particularly low in the Canadian housing market, with transactions down 17.3% from their 10-year average, noted the bank.Several factors continue to weigh on the real estate market, including population decline, the weak performance of the labor market since the start of the year, and economic and geopolitical uncertainty, stated National Bank. The conflict in the Middle East has even had spillover effects on the Canadian real estate market, with mortgage rates rising in March as bond yields increased due to the rise in inflation anticipated by the markets.Looking ahead, a pickup in activity could be possible later this year if the trade uncertainty surrounding the renewal of the USMCA trade deal is resolved, the bank pointed. In the meantime, activity levels during the peak spring season are likely to remain low, leading National Bank to forecast a 5% decline in transactions in 2026 compared with the year before.Housing starts decreased by 15,100 from 251,0000 in February to 235,900 in March, seasonally adjusted and annualized, a print well below the consensus calling for 258,000, added the bank. This decline was driven by a pullback in urban areas (-14,600 to 224,0000), while rural areas also edged lower (-500 to 11,800).Looking ahead, housing starts could remain above their historical average in 2026, as several projects that had been planned in a context of strong population growth will begin construction, according to National Bank.However, with the demographic context now much less favorable, causing a sharp rise in vacancy rates in the rental sector and unsold inventory, the new construction sector is expected to slow down during the year and should be particularly weak in 2027 and beyond.In addition, high construction costs and fixed interest rates that have fallen much less than short-term rates -- which have even increased recently due to the conflict in the Middle East -- is another constraining factor for construction in the residential sector.
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