The real estate market in Canada has been experiencing a significant slowdown, with the average price of a home falling by over 20% since February. According to the Canadian Real Estate Association, this decline in prices has been consistent for the past six months, coinciding with the Bank of Canada's decision to raise interest rates in March.
In August, the average selling price of a home was $637,673, a decrease of almost $200,000 from its peak in February at $816,720. Although there has been a slight uptick in August's average selling price compared to the previous month, experts caution against seeing this as a turning point for the market.
Rishi Sondhi, an economist with TD Bank, explains that the recent uptick in Toronto was mostly fueled by a bounce in the market and should not be mistaken as a sign of recovery. He highlights that the conditions in Toronto still indicate caution, suggesting that the market has not yet reached a turning point.
Conversely, Vancouver is experiencing a buyer's market. Simon Bilodeau, a mortgage broker, notes that the market has shifted in favor of buyers, with people who had previously given up on homeownership due to competition and difficulty finding properties now reentering the market. The increase in interest rates implemented by the Bank of Canada has contributed to the cooling off of the real estate market.
Economist Robert Kavcic from the Bank of Montreal acknowledges that although the volume of home sales has returned to pre-pandemic levels, there is still a significant gap between sellers' expectations and buyers' affordability. This discrepancy is prolonging the buying and selling process and may extend well into next year.
Despite the slowdown, some homeowners like Pierre Béchereau remain optimistic. Béchereau is currently selling his home in Toronto's east end to move to a different part of the same city. He believes that even though the market is not as hot as before, it is still active. He sees the current market conditions as an opportunity, where buyers can take advantage of lower mortgage rates that are no longer available.
It is important to note that the recent rise in mortgage rates, from approximately 1.5% at the beginning of the year to more than 5% now, will have a delayed impact on the market. Some buyers who started their search in the spring may still be pre-approved at lower rates, making discounted purchases appealing. However, there is a larger concern about absorbing the significant interest rate shock, which will likely take more time to fully materialize.
In conclusion, the Canadian real estate market continues to experience a slowdown, with average prices decreasing by 22% since February. While Toronto remains cautious, Vancouver has become a buyer's market. Despite the decline, the market remains active, presenting opportunities for both buyers and sellers. However, the full impact of rising mortgage rates is still to be felt, and it may take more time for the market to stabilize.
