The Bank of Canada (BoC) increased the overnight lending rate to 5.0 per cent in a bid to control inflation.
Though buyer demand remains “strong,” sellers are “hitting pause” on their decision to list their home, putting additional pressure on already low inventory, Royal LePage reports.
According to its House Price Survey released July 13, the aggregate price of a home in Canada dropped 0.7 per cent year-over-year to $809,200 in the second quarter of 2023. That indicates that nationally, the real estate market is close to the point where it will have recovered fully from 2022’s post-pandemic market correction, according to Royal LePage.
On a quarter-over-quarter basis, the aggregate price of a home in Canada rose 4.0 per cent in the second quarter. That was the second consecutive quarter to show positive growth following a rapid decline in prices over the last year due to the BoC’s aggressive interest rate hike campaign, which began in March 2022.
In Markham, the price of the average house increased from nearly $1.611 million to $1.699 million – or 5.2 per cent – between the first and second quarters of this year. The average price here in the second quarter of 2022 was about $1.578 million.
“Almost all Canadian homeowners have seen the value of their properties appreciate handsomely over time,” says Royal LePage President and CEO Phil Soper. “A few who purchased at the tail end of the pandemic-fueled real estate boom saw the value of their homes drop below purchase price during the subsequent market correction. We are close to that pivotal point where people who purchased at the peak would break even if they sold today.”
Despite the central bank’s decision to start raising interest rates again, demand remains strong, particularly among those who have secured a rate hold. “Buyers who are determined to make a purchase this year have accepted the reality of higher initial carrying costs, rationally surmising that rates are at or near peak and will become more affordable before long,” Soper says.
Some buyers may have to adjust their expectations, widen their geographical search parameters or acquire a property that is smaller or more affordable in order to be successful, he adds.
Royal LePage forecasts the aggregate price of a home in Canada will increase 8.5 per cent in the fourth quarter of 2023 compared to the same quarter last year. It revised its previous forecast upward to reflect strong activity and price appreciation in the first half of the year.
Meanwhile, Point2, an international real estate search portal, recently looked at how many years’ worth of income it would take to upsize from a condo to a house across Canada’s largest cities. In Markham, houses go for at least double the price of condos: $1.563 million versus $727,100 for a net difference of $835,600.
Those looking to upsize in Richmond Hill face the biggest price gap of 149 per cent. Transitioning to a house means saving the equivalent of one’s entire income for more than 10 years in Richmond Hill and more than nine years in Toronto. Compare that to Windsor and Kingston, where matching the $115,600 and $135,750 price gaps would take about two years’ worth of income.
Photo courtesy of Royal LePage.