“Looking at local market trends across the country, one thing that stands out in markets with historically tight supply is a larger-than-normal drop in new listings,” says Shawn Cathcart, senior economist for the Canadian Real Estate Association (CREA). “The question going forward is how many sellers out there are waiting to list their property, how much demand will respond and how will that impact prices later this year?”

CREA says new listings were at a near decade low in January. In Toronto, there are 35 per cent fewer active listings than at this time last year.

“In an efficient housing market, the acceleration in price growth that was experienced in 2019 would prompt an increase in the number of new listings in 2020, as homeowners would list their homes for sale in order to take advantage of equity gains,” says the Toronto Regional Real Estate Board in a recent report. “However, generally speaking, home prices have been trending upward over the last decade, yet listings have flatlined.”

A recent survey by Ipsos, commissioned by the board, says 14 per cent of homeowners say they are “very likely” to list their home for sale this year. This is about the same as in similar surveys in the two previous years. The board says even a flat listings trend “would represent a marked turn-around” in the number of new listings.

But it says, “The bottom line is that new listings will not keep up with sales growth in 2020. With little or no relief forecast on the listings front over the next year and demand expected to increase, it is difficult to forecast anything but further increases to average home prices for all major home types in 2020.”

So why are homeowners so reluctant to list, when a lack of competition means they should be able to get top dollar for their home?

Dominic St-Pierre, vice president and general manager of Royal LePage in Quebec, told the Montreal Gazette that homeowners don’t want to list because they know their home will sell fast and they have not yet found a home they want to move into – due to a lack of listings. “If 1,000 people do that, it generates a lot less properties on the market and it just accelerates the inventory problem,” he says.

It was once thought that when the baby boomer generation reached retirement age, they would downsize and create a glut of listings on the market. But many boomers have decided to stay in their current homes. A 2018 survey for HomeEquity Bank found that half of the boomers had no plans to downsize. For seniors, aging in place in their homes is the most desirable option.

“Active listings for both single-detached units and condos have declined, on average, since 2011,” says Rishi Sondhi, an economist with TD Economics in a report.  “Notably, provinces with older populations have generally seen larger declines in listings.”

Sondhi says the sharpest drops in listings last year were in Alberta and Saskatchewan, both of which had soft economic conditions and falling home prices.

He says people are moving less than in previous decades. In the 2006 census, homeowners represented 31.5 per cent of movers. That number dropped to 28.9 per cent in 2011 and to 26.4 per cent in 2016.

The slowdown in new home completions may also be partly to blame for the listings slowdown, says Sondhi. “Completions as a share of units under construction hit their lowest level on record in the fourth quarter of 2019. This is partly a function of the fact that apartments have consumed an increasing share of overall homebuilding, and these units generally take longer to construct. In addition, the trend in actual completions has been flat since the recession. These units eventually hit the resale market, so their sub-par performance is negative for existing housing supply.”

Depending on who you talk to, Toronto’s double land transfer tax (collected by both the province and the city) may also be a factor in the lack of listings in the city. “Statistical analysis suggests that there has been a fundamental change in the behaviour of Toronto’s resale supply in the post-recession period. However, as several factors have likely combined to create this outcome, it is extremely difficult to tease out the impact from the land transfer tax,” says Sondhi. “Nonetheless, it remains feasible that activity in Toronto is being restrained, at least to some extent, by the implementation of an additional land transfer tax in 2008.”

Another reason why listings are down could be because there is less speculative activity, says Sondhi. “The significant measures undertaken by governments and regulators, alongside slower overall market activity, have appeared to reduce the extent of speculative buying in Canada’s largest markets over the past few years.” This means it’s less likely that a property would be listed multiple times over a short time period, he says.

However, the Ipsos survey conducted for TRREB says the market may soon see an uptick in investment property listings.

“Many current investor-owners have benefited from strong market value increases over the past decade,” says the TRREB report. “These paper gains in wealth, coupled with the prospect for further government intervention (for example, the potential for vacancy taxes), appears to be pushing some investors to at least think about selling their investments.” The survey found that 66 per cent of investor-owners in the GTA said they were very likely or somewhat likely to list their investment properties for sale in 2020.