Anesh Bhandari and his wife decided to sell their home in early May, less than a year after purchasing their four-bedroom townhouse in Surrey, BC for $870,000.
Both were looking forward to their first open house, Bhandari said, betting on how many showings the house would get. Later they found out that only one person had come to view the property.
“It was an eye-opener,” Bhandari told CTVNews.ca in a phone interview on Thursday. “My buyer didn’t expect that, nobody did.”
Bhandari and his wife plan to move from British Columbia to Ontario to be closer to your employer’s office in Mississauga. But now the process of selling their house and buying a new house is a struggle, said the 36-year-old.
After 30 days on the market, the 167-square-foot house listed for $1.15 million still hasn’t sold, even though it’s listed for $50,000 less than similar homes in the area, Bhandari said. He took the house off the market in mid-June.
“At that time, sellers were waiting for yesterday’s price and buyers were looking for tomorrow’s price,” Bhandari said.
After getting an extension from his employer to work from home until December, Bhandari now plans to relist the house in October with the goal of selling it before the end of the year.
Bhandari is one of several Canadians who spoke to CTVNews.ca about the impact Canada’s housing reform is having on their decision to buy or sell a home. Housing markets are now experiencing a “far and wide” correction across the country following a series of interest rate hikes by the Bank of Canada, according to a new report from Royal Bank of Canada (RBC).
Declining home prices, coupled with less resale activity, indicate that housing markets in Canada are currently slowing. According to RBC’s forecast, median home prices in Canada are expected to decline through the remainder of 2022, eventually falling 12 percent from their peak in February in mid-2023.
“[This] It’s an important correction, RBC Assistant Chief Economist Robert Hogg told CTVNews.ca in a telephone interview Wednesday. “We rarely see this kind of double-digit price reduction nationally.”
The increase in interest rates played a key role in correcting some of the anomalies in home prices that Canadians saw during the pandemic, said James Laird, CEO of Ratehub.ca.
“The last few years have been irrational and it’s some rationalization to make up for the excitement that’s happening right now,” he told CTVNews.ca in a phone interview on Wednesday. “Given the red-hot momentum of the last two and a half years, we feel it makes sense now to take a breather.”
After hitting a record high of $816,720 in February, the national median home price has been steadily declining, according to data from the Canadian Real Estate Association (CREA). Canada’s median home price in June was $665,849, not seasonally adjusted.
Uncertainty about what to expect from the Bank of Canada regarding further interest rate hikes may be encouraging some Canadians to sit out the market, Laird said.
“The central bank is still moving from pandemic rate policy … to post-pandemic inflation policy, we don’t know exactly where the bank wants to go,” Leary said.
In the face of a volatile market driven by declining home prices, Hogg says current sellers need to be proactive and realize the market is very different than it was just a few months ago.
“Prices are likely to continue to decline in the coming months, so the market is unlikely to be friendly to sellers in the short term,” Hogg said. “Buyers are coming to the market with a small budget… Until then, they have strict limits [how much they can afford]He said.
Toronto, Vancouver areas more balanced
According to RBC, large housing markets across Ontario and British Columbia are expected to see some sharp corrections compared to other regions in Canada. The reason for this is the sky-high house prices that characterized these areas during most of the Covid-19 outbreak. Hogg said these areas are more sensitive to interest rate hikes.
According to data compiled by CREA, the median home price in Ontario and British Columbia rose by $1,086,493 and $1,104,098 in February. Both figures are not seasonally adjusted.
Since then, over 13 years, activity has slowed to a trickle — not including pandemic lockdowns. Frank Clayton, an economist and senior research fellow at Toronto Metropolitan University, says that when the market is out of balance, it gives room for more bargaining between buyers and sellers.
“[Buyers] They have to keep their eyes open because … there are always people who have to sell,” he told CTVNews.ca in a phone interview Wednesday. “Some people don’t want to wait six or eight weeks and hope their house sells. They might want the money right away.”
While it may not be a buyer’s market in parts of southern Ontario, Clayton said, markets are becoming more balanced. The same is true in the Greater Vancouver area, RBC reports. Housing activity in the region has fallen 40 percent over the past four months, and home prices for all home types are down 4.5 percent since April.
It’s also important to understand that some areas in these regions feel the effects of corrections differently than others, Laird says.
“[Prices in] Properties in the suburbs and rural areas have increased significantly in the past two years… and these are the places [where] The prices are adjusting a lot,” said Laird. “[But] The suburbs did not rise as much as the surrounding suburbs [so] They are not correcting that much either.
Homes still ‘undervalued’, says real estate expert
The real estate outlook from Desjardins also points to New Brunswick, Nova Scotia and Prince Edward Island facing sharp corrections after home prices fell during the pandemic.
Parts of Alberta, however, are expected to be more resilient. Despite the drop in prices, the correction in this part of Canada is expected to be mild compared to others, Hogg said.
While median home prices are falling nationally, that doesn’t mean housing has become more affordable for Canadians, Laird says.
Lower home prices are driven by higher interest rates, which forces homeowners to pay more interest on their mortgages. With higher borrowing costs, homebuyers may be less likely to qualify for a mortgage as a result, Hogg said. This makes it especially difficult for first-time home buyers looking to enter the housing market.
Taylor Wright and her fiancé are renting a one-bedroom apartment while they look for a new home. Looking to buy in Ajax, Ont. Or Whitby, Ont., with an $800,000 budget, Wright said she and her fiancé are off the market.
“Every home we look at is close to $100,000 over the asking price, and we’re not willing to get into a bidding war and pay a down payment on a home,” Wright wrote to CTVNews.ca in an email on Thursday.
Keeping a close eye on the state’s housing market since the pandemic began, Wright said she’s seen home prices “go up and out of reach.” Still, she said, interest rates and cooling prices are giving her hope that she will be able to buy a home within six months.
Diordan Svelander and his wife are looking to buy a home in the Greater Vancouver area. With sky-high home prices, he says, he can’t afford a down payment on a home even if he’s working two full-time jobs.
Svelander said he and his family tried looking north of the city, where the couple had their eyes on a house in Chetwynd, BC, but with interest rates rising year-round, they couldn’t afford it anymore.
“Our savings were not enough to meet the stress tests, and we exhausted all of our options to try to buy,” Sveland wrote in an email to CTVNews.ca on Wednesday.
As a result, the couple is now renting a two-bedroom with their two young children and pets, Svelander said.
A recent Ratehub.ca report assessed the income needed to buy an average home in various Canadian cities. So far, financial losses from higher interest rates have not been offset by gains from lower home prices, Laird said. In all Canadian cities included in the report, residents need more income on average to afford a typical home.
“You had a better chance of buying a home a year ago, but with lower mortgage rates … “It really means everything is less affordable than ever before,” Laird said.