In the past year housing affordability was a major topic in national discussions when housing prices rose as the Canadian property market boomed in its growth across large urban centers as well as rural communities.
The conversation this year is supposedly changing as buyers, sellers market analysts, and industry experts discussing the direction that the Bank of Canada (BoC) will take in 2024, as well as the levels of immigration. The central bank is likely to reduce interest rates next year, or maintain the current policy rate for a longer period? What will the immigrant boom affect the Canadian real property market?
However, this doesn’t mean that the debate on affordability in housing is over as the national average for home prices is still higher than their pre-pandemic average. As per CREA Canadian Real Estate Association (CREA) The average cost of selling a house increased by nearly 2 percent from the previous year.
If the hot market in Toronto as well as Vancouver are taken out of their equations, standard price of a house drops.
Although the rate of price growth has decreased following the boom in housing prices of 2020-2021 however, they haven’t dropped amid a backdrop of increased interest rates and six percent mortgage rates. It doesn’t matter if it’s a single-family home or condominium and residential property, prices are still high due to their explosive rise.
Is a Lack of Supply Still Keeping Prices High in the Canadian Real Estate Market?
According to the data released by the nation’s real estate organization the sales of residential properties fell around six percent per month during October, but grew 0.9 percent compared to the same period one year ago. Additionally, the number new homes listed for sale decreased by 2.3 percent between September and Oct. CREA statistics show. It was the first decrease since the beginning of March.
In addition, the inventory count is the measure of the length of time it would take to run out of the stock at the current rate of sales activity reached 4.1 during October. This is up from the low in May of 3.1 however, it’s still less than the long-term average of approximately five months of housing stock.
Construction of new housing has slowed from last year. Canada Mortgage and Housing Corporation (CMHC) statistics reveal that housing starts remained similar over the course of October, with a total of more than 22,000. However, year-to date housing starts fell by 7 percent year-over-year with 187,314 units.
The major cities are seeing significant construction activity in the housing sector specifically for apartments, according to CMHC vice-president of economics Kevin Hughes. While much of this started in an era which was characterised by historically low rates for interest rate, Hughes told CBC News that this could be sustained due to the high rental demand.
However, the increase in demand and home sales indicate that more inventory is coming on the market or that inventory remains on the market for longer. But, this increase is offset by the lower demand that was present a few months ago experts claim.
“We know housing demand is extremely high all across the country, but October’s resale data was further confirmation that it probably won’t be manifesting itself in the existing home market for the remainder of this year and likely not until spring 2024 at the earliest,” said Shaun Cathcart, CREA’s Senior Economist, in a press release. “The increase in activity over the past few months is a glimpse of what might happen next year. It’s all going to boil to the question of whether it is the case that Bank of Canada must increase interest rates or if, by March next year, it’s merely the matter of when we’ll witness the Bank cut its first rate.”
While the housing market is improving across the country, gains are not as consistent in some important housing markets. For instance, the number of new listings within Ontario Ontario property market increased almost 26 percent year-over-year in October, averaging over 31,000 homes in accordance with the Ontario Real Estate Association (OREA). This was approximately 10 percent more than the fiveand ten-year medians of this period in year. Active residential listings also soared by nearly 36 percent over the course of a year to over 50k units. This was 40% higher than the average of five years and 14 percent higher than the 10 year average.
The situation in British Columbia, the number of active listings for residential properties is about 50% below the level they must be in order to maintain a balance in the real property market. The positive news? They’re up 12 percent year-over-year, and increased by five per cent month-to-month, The British Columbia Real Estate Association (BCREA) reported.
Population Boom Supporting Prices?
As the population of Canada grows due to the federal government’s plans to accept more than a million new immigrants over the next few years, the demand in Canadian properties is likely to remain strong. Although rising interest rates might reduce some of this demand, the effects of the pandemic may persist.
Maybe Jason Mercer, chief market analyst at the Toronto Regional Real Estate Board (TRREB) has summarized the state of the Canadian real estate market the best in the past this year “We’re seeing a gap in the ‘missing middle.'” In the meantime, until more homes are built and more homes are built, it could be difficult to make it possible for prices to drop to a level that more households and families are comfortable taking that huge leap to homeownership, no matter if it’s in the city of Toronto as well as Vancouver or a tiny city within Atlantic Canada and the Prairies