Canadian real estate markets are facing a period of softening as higher interest rates begin to take their toll. Recent data from October reveals a decline in existing home sales and a rise in inventory, which has resulted in a doubling of the pace of price declines for a typical home.
The weakening trend is visible across the country, with existing home sales experiencing a 5% decrease in October and a 12% drop over the past four months. Concurrently, the increasing inventory has contributed to pushing home prices lower.
In October alone, home prices fell by 0.8%, which is twice the rate of decline compared to the previous month. If this trend continues, it could lead to unadjusted annual growth dipping into negative territory.
According to Robert Hogue, assistant chief economist at RBC, the decline in the real estate market is primarily driven by higher interest rates and a lack of affordability. Provinces such as British Columbia and Ontario, where prices are highest, are particularly affected by this trend.
Ontario, which had previously experienced a boom in real estate, is now witnessing a significant slowdown. Rising interest rates, which previously boosted prices, are now reversing that activity. Home resales in the province have fallen for the fifth consecutive month in October, reaching the lowest levels since the Great Financial Crisis.
Other regions that were initially resistant to the national slowdown, such as Alberta, are also starting to show signs of weakening, with existing home sales declining by 8.3% in October.
Despite some relief in mortgage rates, RBC expects the market weakness to continue in the coming months. The bank predicts that as more sellers enter the market due to higher interest costs, buyers may gain more pricing power, potentially leading to further price erosion in Ontario and British Columbia.
Q: What caused the decline in Canadian real estate markets?
A: The decline in Canadian real estate markets is primarily attributed to higher interest rates and a lack of affordability.
Q: Which provinces are most affected by the weakening trend?
A: Provinces such as British Columbia and Ontario, where prices are highest, are particularly affected by the decline in real estate markets.
Q: Is the slowdown limited to Ontario?
A: No, other regions, such as Alberta, are also starting to show signs of weakening in the real estate market.
Q: Will the weakness in the real estate market spread to other regions?
A: The bank warns that the weakness may potentially spread to other regions in Canada.