New Brunswick Housing Market Showing No Signs of Cooling Yet

Many market analysts and industry observers have wondered if a reopening economy and rising interest rates would hit the pause button on accelerated price growth in the Canadian real estate markets, particularly in areas of the country that had been historically undervalued. Atlantic Canada had been a segment of the nation’s housing sector that enjoyed exceptional gains over the last two years. From the New Brunswick housing market to real estate in Prince Edward Island, the east coast has witnessed a boom unseen in multiple decades.

But now that the hawkish Bank of Canada (BoC) is pulling the trigger on greater rate hikes will this end the pandemic-era housing boom? This has been the expectation. However, in New Brunswick, it has been a case of demand exhaustion but sky-high valuations. What is happening exactly?

New Brunswick Housing Market Showing No Signs of Cooling Yet

According to the New Brunswick Real Estate Association (NBREA), residential property sales tumbled at an annualized rate of 9.8 per cent in May, totalling 1,209 units. While this was a notable drop from the same time a year ago, transactions were still well above historical norms for the month of May: 12.9 per cent above the five-year average and 27.2 per cent above the 10-year average.

Home sales were down in the province’s major areas:

• Fredericton: -13.9 per cent
• Greater Moncton: -1.6 per cent
• Saint John: -15 per cent
• Northern and Valley Regions: -12.1 per cent

Although diminished sales activity was surprising, prices did not follow the same trends, association data highlighted. In May, the MLS® Home Price Index (HPI) advanced 29.8 per cent year-over-year to $296,700. What’s more, all the major property categories posted sizable benchmark price gains.

• Single-Family: +29.6 per cent to $297,800
• Townhome: +45.4 per cent to $258,100
• Apartments: +31.3 per cent to $260,900

In addition, the average price of homes sold in May climbed 25.2 per cent to $316,083.

On the supply front, conditions were mixed for prospective homebuyers.

NBREA statistics found that the number of new residential listings jumped by 4.2 per cent year-over-year to 1,776 units. They were also 5.4 per cent above the five-year average, but new listings were three per cent below the decade average.

Active residential listings tumbled at an annualized pace of 21.6 per cent, totalling 2,382 units. This is the lowest reading for this time of the year in more than two decades. Historically, active listings were more than 46 per cent below the five-year average and more than 61 per cent below the 10-year average.

Housing stocks also slipped. Months of inventory, which measures the number of months it would take to exhaust current levels of supply at the present rate of sales activity, totalled just two at the end of May, down from 2.3 months at the end of May 2021. This was also below the long-run average of seven months.

New housing construction activity in the province has been robust this year. According to Canada Mortgage and Housing Corporation (CMHC), housing starts totalled 720 in May, up nearly 29 per cent year-over-year. In the first five months of 2022, housing starts totalled 1,267 units, up more than 25 per cent from the same period last year.

No Longer Affordable?

New Brunswick had long been one of the most affordable housing markets in the country, prompting many to pour into the province and take advantage of prices.

The Prairies now enjoy the title of most affordable housing markets in Canada, including regions in Alberta, Manitoba and Saskatchewan, which is buoyed by considerable population growth. The latest Saskatchewan REALTORS® Association (SRA) numbers show that the Prairie province’s benchmark price for a house is $289,500.

Although there are still bargains to find, they are shrinking, says Mike Power, the president of the Greater Moncton Realtors, in a news release.

“While other boards and associations are seeing a slowdown in sales, MLS® home sales in our region during May posted the highest monthly total since June of last year,” said Power in a statement. “This is partially due to the influx of new listings during the period. The number of newly listed properties in May was the highest single-month total since 2016. As a result, overall inventory at the end of May rose to the highest level in eight months. Although down from the astronomical highs we saw last year, market balance is still firmly in favour of sellers. Consequently, the MLS® HPI Composite Benchmark Price rose to another new record, continuing the streak of year-over-year percentage gains in the mid-30-per-cent range.”

The next few months should be compelling in the broader real estate market as interest rates continue their upward climb in an effort to tamp down inflation.