UnionCity Condos.House prices in Canada fell at a record pace. Canadian house prices fell the most on record in 2022 as rapidly rising interest rates forced the market to adjust, which may need to be done further.Please Visit: UnionCity Condos to Get Your VVIP Registration Today!
Benchmark Canadian house prices fell 1.6 per cent to C $730600 in December, down 13.2 per cent from their February peak, the Canadian Real Estate Association (Canadian Real Estate Association) said on Monday.
This is the biggest decline from peak to trough since the group began compiling data in 2005. Last year was also the biggest drop in house prices on record, falling 7.5% for the whole year.
With the Canadian economy in danger of recession and the Bank of Canada warning of further interest rate hikes to combat persistent inflation, the housing market is likely to face continued pressure in the coming months.
With a record number of buyers using floating-rate loans to buy homes during the Canadian pandemic property boom, the pressure on these borrowers is likely to grow if mortgage costs remain high. Job losses caused by the economic slowdown will also make it harder for people to repay their loans and keep their homes.
Economists surveyed by Bloomberg predict that Canada will enter a recession in the first half of this year.
“when we look forward to the crucial spring sales season, the most important question is who will wake up from hibernation, the buyer or the seller?” Douglas Porter, chief economist of Bank of Montreal (Bank of Montreal), commented on the new sales figures in a report to clients. “We suspect that the market will still absorb the rapid rise in interest rates and buyers will be more reluctant to reappear, which will put pressure on prices for some time.”
So far, the downturn in the real estate market has been mainly caused by the withdrawal of buyers who cannot afford house prices because of rising interest rates. On a non-seasonally adjusted basis, home transactions fell 39% in December from a year earlier, when the market was nearing its peak and interest rates had not yet begun to rise.
Sales rose 1.3 per cent in December compared with November, while the number of newly listed homes fell 6.4 per cent as more potential sellers chose to wait for the weak market to end.
This may be seasonal to some extent: in Canada, the number of home listings tends to decline in winter and then increase again when the weather gets warmer in spring, which is usually the busiest sales season.
So far, the decline in house prices does not seem to be enough to attract many buyers back, as the rise in borrowing costs far outweighs the fall in prices. The Bank of Canada (Bank of Canada) has raised its benchmark interest rate from a record low of 0.25 per cent in March last year to 4.25 per cent today, meaning potential buyers of five-year mortgages now typically face interest rates of about 6.5 per cent.
Although house prices fell last year, they rose so fast during the buying spree during the epidemic that benchmark prices in December were still 33 per cent higher than they were three years ago. For typical buyers dependent on mortgages, housing affordability has deteriorated to its worst level ever, as mortgage rates rise and house prices remain high, according to a report by Royal Bank of Canada last month.
