The COVID-19 pandemic boosted Canada’s economy, but now the real estate market shows signs of weakness as home prices decline and bidding wars end.
It’s good news for potential buyers hoping for a lower price. However, realtors and economists differ on how long and low the price decline will last as the busy fall season approaches.
According to John Pasalis, president of Realosophy Realty Inc. in Toronto, fall will be interesting because more buyers will probably jump into the market, and there is no need for many buyers to stabilize prices.
“Just a little bit of a bump in demand could be the difference between homes selling in three, four weeks versus selling in two weeks or selling a lot faster.”
Although the average property price is still higher than before the pandemic, rising mortgage rates and inflationary factors are putting pressure on the market.
The Toronto Regional Real Estate Board reported that the average property price in the region, one of Canada’s most desirable areas, was $902,680 when pandemic lockdowns started in March 2020. It was $1,074,754 last month, a 1 per cent increase from July 2021 but a 6 per cent decrease from June 2022.
According to the most recent data from the Canadian Real Estate Association (CREA), prices reached $629,971 in July, a 5 per cent decrease from $662,924 last July.
It was $650,760 on a seasonally adjusted basis, a 3 per cent decrease from June. The average price across the country was $543,920 when pandemic lockdowns started in March 2020.
According to association predictions, the national average home price will increase by 10.8 per cent annually to $762,386 by the end of 2022. Moreover, it will hit $786,252 by the end of 2023.
Three Desjardins economists predicted in June that the average national home price would decline by 15 per cent between its February high of $817,253 and the end of 2023. However, because it is already August, they revised their prediction to a decline of between 20 and 25 per cent.
In a report published on July 11, Randall Bartlett, Helene Begin, and Marc Desormeaux stated that “home prices continue to fall and have further to go before they find a bottom.”
Despite this, they expect nationwide properties will have a value higher than pre-pandemic levels by the end of 2023.
Agents have recently observed potential buyers staying away from the market in expectation of a price decline. Sellers adjust to the realization that their properties won’t sell for as much money as they would have at the beginning of the year. It’s a “stalemate,” according to Lori Fralic.
Many people are looking for deals out there that make offers, but many sellers decline them if they don’t have to sell. According to the Vancouver agent with Keller Williams Realty VanCentral, “we are seeing lowball bids.”
It represents a shift from the frenetic sales pace and bidding wars of earlier this year and late last year.
Mortgage rates, which reflect changes in interest rates and therefore reduce purchasing power, are mostly to blame for this move.
The Bank of Canada raised its interest rate by one percentage point to 2.5% in July, the most significant increase in the nation in the last 24 years. Economists believe this rise will continue.
According to Fralic, economists are already advising buyers who don’t need to buy right now to put off their purchases. In addition, she has noticed a decline in pricing in B.C., but she claimed it is not as significant as many had anticipated.
Further, she explained housing costs in Metro Vancouver are far higher than the 10-year norm, and if they do fall, they may only do so briefly before rising again. So there has always been a gradual ascent with dips all the way.
The Real Estate Board of Greater Vancouver said that in July, the region’s composite benchmark price, which is frequently Canada’s hottest, was over $1.2 million, an increase of over 10 per cent from July 2021 and a decrease of 2 per cent from June 2022.
According to Sherry Cooper, chief economist of Dominion Lending Centres, the amount of price decline is uncertain. She says markets are typically highly regional, so others may not replicate some people experiencing fluctuations.
She says, for instance, that Alberta has not experienced the slump that many other Canadian markets have since the province’s petroleum sector is far more robust than it once was.
Cooper, however, pointed out that the Greater Toronto Area, the Greater Golden Horseshoe Area, and areas of British Columbia near Vancouver have all seen a substantial fall in property sales.
Since they are the most expensive properties in Canada with the most significant outstanding mortgages, the markets where home values rose by 50 per cent have had the steepest decline.
The Canadian Press first released this article on August 24, 2022.
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