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In January 2020, the average resale price in Canada was C $504350. In January 2022, our average price was C $748439, in other words, house prices increased by 48.4% in 24 months.
However, as house prices rise, will there be more people selling houses? No.
MLS’s monthly report on home sales has repeatedly stressed that at a time of strong demand, the number of homes for sale is at an all-time low.
Now, no one is willing to sell the house.
If the house price will be higher in a month, why sell it now? And if you sell it, where can you move to?
It is conceivable that for most rigid demand buyers, interest rate hikes and inflation are not a big deal, they are only afraid that they will not be able to buy a house.
Now, Canada is in a very similar situation, with many people getting real estate mortgages at an interest rate of about 1.5 per cent in 2020 and 2021, which is actually inverted to lenders compared to the fact that inflation is likely to reach more than 3 per cent.
Borrowing money to buy a house has become a means of financial management in the eyes of many people, but every cheap commodity secretly marks the real price.
With the end of the epidemic, the Bank of Canada will sooner or later return to the interest rate hike cycle, when homeowners who sign up for 25% of their loans will find that 1.5% of loan rates are likely to be 3.5% or higher.
Historical experience shows that Canadian mortgage rates were as high as 6% in 2007 and 3.5% in 2018-2019.
In fact, the judgment of most commercial banks is that future interest rates are likely to rebound to a range of 3% Murray 5%.
Adam Major said that when the loan interest rate rises from 1.5% to 3.5%, the actual monthly repayment will increase by 30%, that is, the original monthly repayment will increase from 3000 yuan to 3900 yuan; if the interest rate rises to 5.5%, the monthly repayment will increase to 4900 yuan.
Canadians who now swallow property at ultra-low interest rates will one day find that it is a poison bait.
With Canadian temperament, they are absolutely unwilling to tighten their belts and pay for houses, so there is likely to be a sell-off caused by rising mortgage interest rates in the future.
The Adam Major predicts that Canadian house prices could fall by 40 per cent if mortgage rates rise to 5.5 per cent or more.