Canada’s domestic market may experience a chill this fall as potential buyers and sellers wait to see where the Bank of Canada’s interest rate trajectory will go, new surveys released Tuesday revealed.
Based on surveys of brokerage agents, Re/Max Canada stated in a report that based on the state of the market, Domestic house prices are expected to remain stable from August through the end of the year.
The housing market this fall is expected to be “weaker” due to a shortage of available inventory in most housing markets and interest rates at their highest levels in more than 20 years, according to the Re/ study. Max.
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- The impact of the Bank of Canada on the fall housing market
- This is what Alexander predicted
- Prices could rise in more affordable markets
- Research conducted for GenZ and Millennials
The impact of the Bank of Canada on the fall housing market
Credit: Global News
Uncertainty about where the Bank of Canada’s key interest rate will go next (the central bank’s next decision is scheduled for Wednesday) also guides many buyer-seller decisions, according to a Re/Max survey.
The brokerage hired Leger to survey more than 1,500 Canadians in July following the Bank of Canada’s quarter-point rate hike that month. A third of those interested in buying or selling a property in the next 12 months said they would wait to see how interest rate changes play out before making a decision. Meanwhile, more than half (51%) responded that future rate hikes this year will not affect their financial situation or their plans to buy or sell.
According to Chris Alexander, president of Re/Max Canada, Canadian buyers and sellers are reluctant to move because there is uncertainty about where interest rates will go next and because there have been some shocks during the current rate tightening cycle. He tells Global News that the main causes are the erratic behavior of the Bank of Canada and the crucial overnight loan rate, which rises rapidly before pausing and then rising again.
“We’ll see more of the same if they go higher again. Suppliers cautious and buyers cautious.”
This is what Alexander predicted
Credit: Global News
However, Alexander says this is a “smaller market segment than people expected.” He predicts that some homeowners already “on the brink” may drop out of the market because they can’t afford the maintenance costs of a more expensive mortgage.
According to the Re/Max survey, inventory has been tight this year, with reductions in the housing stock from January to July reported in 74.1% of markets year-over-year.
As Alexander pointed out, homeowners looking to move up may be scared because rising interest rates may limit the types of mortgages they qualify for. According to him, Canadian real estate market inventory levels would be constrained for much of 2023 as prospective sellers delay selling existing properties and new projects are postponed due to high spending for homebuilders.
Prices could rise in more affordable markets
Credit: Reuters
While Re/Max anticipates little change in property prices across the country, some locations are projected to see an increase through 2024.
From August through the end of the year, prices are projected to rise in the Greater Toronto Area (up 2.5%), Moncton, New Brunswick (up 3%), Calgary (up 4.5%), and Sudbury , Ontario (up to 5%). ).
Re/Max predicts that by the end of 2023, home values will fall in Halifax (-1%), Greater Vancouver (-2%), Kelowna, British Columbia (-3%), and the Durham region in Ontario (down 5%).
According to Alexander, the main differences between these markets as we approach the end of the year relate to relative affordability and business opportunities.
For example, Alberta has been expanding its economy outside of the oil and gas industry. The province has witnessed a large influx of potential buyers due to the more affordable housing costs in the province. According to Alexander, Sudbury and most of the prairies share the same characteristics.
Despite the challenges in the housing market, record levels of immigration, he says, are helping to stabilize any price cuts and fueling competition for the country’s limited housing stock.
According to Alexander, there is often increasing pressure on costs because there is too much competition for too little supply.
Research conducted for GenZ and Millennials
Credit: Daily Hive
Research by Re/Max shows that a lack of affordable housing options has caused 55% of Gen Z respondents (ages 18-28) and 49% of Gen Y respondents (ages 29) to to 43 years old) modify their housing plans in some way.
According to Alexander, despite a protracted real estate correction triggered by the Bank of Canada’s rapid interest rate hikes, “prices are still really high” in much of the country.
The lack of entry-level properties in most cities and higher qualification requirements for mortgages make it difficult for young Canadians to enter the market this fall.
If this is your first time buying a home, entering the market may be very expensive. According to Re/Max, the Léger survey had a margin of error of +/- 2.5%. what do you think about it? Let us know in the comments.
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Source: vtt.edu.vn