Interest rate effects on the Canadian real estate market
Following the Bank of Canada’s first interest rate hike in May of 2022, and in light of the anticipated ongoing hikes throughout the remainder of the year, we asked agents in our network about its effect on their respective markets and any advice they have for homebuyers. Here are their responses:
Dustin Graham
REALTOR® with The Graham Partners and Houseful™ network agent
Milton, Ontario
With the onset of increasing interest rates, both fixed and variable, there has been a noticeable change in consumer behaviour:
- Many would-be buyers taking a “wait and see” approach to their home purchasing plans
- An increase in the number of active listings compared to January and February of 2022
These two factors have contributed to an overall decrease in home values in April compared to February. For example, in April, the average sale price in the Halton Region declined 10.5% compared to February 2022. Although this is a significant decline, average sale values are still up 12.6% year over year. These trends are comparable across many GTA and surrounding municipalities.
When the Bank of Canada increases the rate in June, we expect to notice marginal declines in home values due to decreased buyer purchasing power. However, there continues to be strong demand among consumers to purchase real estate, so we do not expect the market to decline in the long term.
Ultimately, there are several factors currently impacting the market, and although there is a degree of confidence in short-term outcomes, the long-term is a lot more challenging to predict. Our advice to most buyers is to be active within the market. With reduced buyer competition, there are many great opportunities out there. Taking the “wait and see” approach could ultimately yield undesired results.
Our advice applies to first-time homebuyers as well. Operating within a strong sellers’ market can certainly be a challenge for first-time buyers, but there is currently a window of opportunity. It is generally advisable for first-time buyers to enter the market whenever the possibility exists. Never try to time the market as that is typically a losing strategy. It is also critical that first-time buyers work closely with a reputable REALTOR® and ignore the sensationalism often reported in the news.
Mike Marsh
REALTOR® with Marko & Mike Team at Realty One Group Insider
Leduc, Alberta
We haven’t really felt a noticeable impact at all yet from the rate hikes here in Edmonton and the surrounding area. I am busy! Out with clients from morning until night these last few weeks. It’s been bonkers!
The market is still very competitive and active at the $400k or less price point. People’s buying power has shrunk so there are now even more people grouped into this price point. Multiple offers are still the norm in this price bracket. No wiggle room on price for good homes. In the $400k-$800k price bracket, there is still competition for great homes but the price seems to be flexing a little with some negotiating possibility.
Pandemic life meant less spending on travel, dining, and other experiences, leaving some buyers with a bigger disposable income. Many chose to spend it on real estate. Some of the buyers purchasing homes in smaller cities or suburban secondary markets were city-dwellers leaving urban cores. But many were urbanites looking for second homes outside of the city, as many of these markets are popular for secondary or vacation homes.
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