The real estate market in London, Ontario, is experiencing a significant decline in residential home sales. According to local realtor Marcus Plowright, the number of transactions in November was nearly half of what it was three years ago during the peak of the pandemic. This decline is expected to continue into the first quarter of 2024 as home buyers remain cautious due to inflation and high interest rates on mortgages.
Plowright, the owner of RE/MAX Hallmark A Team real estate brokerage in London, describes this decline as a "historic low." In November, there were only 420 residential transactions, a substantial reduction compared to the historical average. During the intense real estate market a few years ago, London recorded over 800 transactions in the same month.
Even compared to the pre-COVID volume, the current number of transactions is significantly low. Plowright estimates that five years ago, the number of transactions would have been 20% higher. He attributes this decline to pent-up demand and a year of continuous interest rate hikes, which have affected consumer confidence in the real estate market as a whole.
The Bank of Canada recently announced that it will maintain interest rates at five percent into the new year, as the country's economy shows signs of cooling down. Plowright believes that the government is intentionally slowing down the economy to combat inflation and that this strategy is having a dramatic effect.
Dallas Martin, an agent with the Mortgage Firm in London, expresses relief that the central bank has not raised interest rates. He believes that higher interest rates would further burden Canadians, potentially leading to more mortgage defaults. With the high cost of living, many people are struggling to afford their monthly mortgage payments. Martin emphasizes that for many, it is a choice between having a roof over their head or putting food on the table.
One of the main factors contributing to the increase in home prices is the lack of housing inventory compared to the influx of immigration. According to Plowright, the median house price in London is around $565,000, with approximately 1,500 houses listed above that price. Meanwhile, the number of houses below the median is only about 400. This shortage of affordable housing makes it more challenging to find and purchase lower-priced homes.
Both Plowright and Martin predict that if interest rates decrease, house prices may increase further. They also point out that immigration levels are contributing to the high demand for housing. As more people immigrate to London, the rental market is struggling to keep up. This shortage of affordable rental housing needs to be addressed by policymakers when discussing the housing crisis.
In conclusion, the real estate market in London, Ontario, is experiencing a significant decline in residential home sales. The cautiousness of home buyers, driven by inflation and high mortgage interest rates, has led to a "historic low" in transactions. The shortage of affordable housing and the inability to keep up with immigration levels contribute to the continuous increase in house prices. As interest rates remain steady, the housing market in London is expected to face challenges in the coming months.
Marcus Plowright is the owner at RE/MAX Hallmark A Team real estate brokerage in London. He says transactions in November 2023 are less than half of what they were in November 2020.
