8 Elm on Yonge Condos.The average price has dropped by 12%! Canadian house prices fell the most in history due to aggressive interest rate hikes by the central bank and restrictions on home purchases by foreign investors.Please Visit: 8 Elm on Yonge Condos to Get Your VVIP Registration Today!
On Monday, January 16th, the Canadian Real Estate Association said benchmark house prices fell 1.6 per cent to C $730600 in December, bringing the total decline since the peak in February to 13.2 per cent; the average home price was C $628318 in December, down 12 per cent from a year earlier.
This is the biggest decline since the association began compiling the data in 2005. Last year also saw the biggest decline since records began, with benchmark house prices falling 7.5 per cent overall.
With the Canadian economy in danger of recession and the Bank of Canada warning that it will continue to raise interest rates to cope with persistent inflation, the Canadian real estate market is likely to face continued pressure in the coming months.
During the COVID-19 epidemic, the Canadian real estate market was extremely prosperous. Attracted by low interest rates, the number of buyers who choose floating-rate loans to buy homes has reached an all-time high. This means that as the Bank of Canada follows the Federal Reserve in aggressively raising interest rates, the mortgage rates of these investors are also rising, and they are under increasing pressure. Canada’s economic slowdown has led to more people losing their jobs and many struggling to repay their loans.
As we look forward to the traditionally hot spring real estate sales season, the most important question is who will wake up from hibernation with more power-buyers or sellers?
We believe that it will take time for the market to fully absorb the impact of the rapid rise in interest rates, and buyers will be more reluctant to re-enter the market, thus keeping real estate prices under pressure for some time.
So far, the downturn in the Canadian real estate market has been mainly due to rising interest rates and being held back by buyers who have been turned away from high prices. Year-on-year, the number of Canadian real estate transactions fell 39 per cent on a non-seasonally adjusted basis in December, while the Canadian real estate market was close to its peak in December 2021 and interest rates have not yet begun to rise.
On a month-on-month basis, sales rose 1.3% in December and new listings fell 6.4%, which may be affected by more seasonal factors. In cold winter months, listings tend to slow down, but pick up again as the weather warms up in spring. Spring is often the busiest time for sales in the real estate market.
So far, the fall in prices does not seem to be enough to attract many buyers back, as borrowing costs are rising much faster than house prices. The Bank of Canada’s benchmark interest rate, which hit an all-time low of 0.25 per cent in March last year, has now risen to 4.25 per cent, meaning buyers are likely to get an interest rate of about 6.5 per cent in the market.
From a regional point of view, the average house price in Regina, the capital of Saskatchewan, fell by 19.8% in 2022, the largest in Canada, 9.1% in Greater Toronto, 4.5% in Greater Vancouver and 3.1% in Montreal. Average house prices in St. John, the second largest city in New Brunswick, rose 14.2%. In major cities, prices in Quebec City and Calgary rose year-on-year.