What is Happening in the BC Real Estate Market?

Home Prices are starting to show signs of Canada’s HOT Real Estate Market cooling off a bit.

Could it be true – Home prices are starting to show signs of Canada’s hot real estate market cooling off a bit. Canada’s home prices declining are being predicted by the Industry’s experts. This is just what they are predicting after we saw the 50% spike in prices over the last two years.

One of the signs of this is the cooling off on bidding wars. Just over a month ago there could be as many as 20 potential buyers on most of the listings out there. Now there are some listings that only say one offer turn up.

Realtors and economists alike see a change in gears from when the market surged by more then 50% since 2020. Some realtors are estimating that the surge started to slow down in February at some point.

What is Causing the Real Estate Market to Cool Off?

• Politicians are piling on measures to rein in the market. Let us know if you think this is too little to late?
• Higher mortgage rates are pulling down purchasing power.
• Prime Minister Justin Trudeau, is getting pressure from the government to make housing affordability the centerpiece of his government’s budget last week. He’s promising various measures to squeeze out the investors along with longer-term efforts to double the rate of home construction.

Although these changes have yet to show up in aggregate price data, which continue to rise, industry veterans are saying things may have finally reached a tipping point.

“We could see some outright price declines,” said Robert Hogue, a senior economist at Royal Bank of Canada. He says markets like Toronto and Vancouver, the country’s two most-expensive cities, could post “single-digit declines” in the second half of the year.

As many have been predicting a crash in the Canadian real estate marketing for a lot of the last three decades, we haven’t witnessed anything other then the market surging. We should at least be seeing a temporary dip.

Prices in both Toronto & Vancouver approximately five years ago, when the government policies slowed the market, matching the central bank raising the interest rates. This is reflecting what is happening now, which could lead to another potential slowdown.

How will this effect Real Estate in other parts of the World?

Canada could be offering a glimpse of what the rest of the world can expect. Just like Canada, the US and other developed countries, Real Estate housing market boomed from the nation’s pandemic. Fueled by a demand for larger living spaces & the record low interest .

Why would Canada be the first place to see a dip? Canada’s ratio of home prices to incomes is stretched more then other countries. Canada was the first to rise at a quicker pace than other markets. Which is why the higher interest rates might actually make an impact here first.

BC Real Estate Market Forecast After a 30-Year High Inflation

Canada’s central bank is expected to raise its benchmark interest rate from 0.5% to 1%. That might just be the beginning, the market is expecting as many as six more hikes this year.

“Rate increases of that magnitude would cut buyers’ purchasing power by as much as a quarter”, said Stephen Brown (economist with Capital Economics).

“There simply may not be enough people who can afford the current prices at a higher cost of financing,” when interest rates rise, “the price to clear the market suddenly needs to drop back to what a median household can afford,” he said. “That’s where we have potential for what I’d describe as almost like an air pocket — where prices have surged so much, there’s potential for them to gap down to find where buyers are able to come in.”

The market’s overall momentum hasn’t been slowed down enough yet, just from the price declines. In March, the benchmark home prices in Toronto, Vancouver, and Montreal, still rose. It was at the slowest pace in six months, but still rose.

Who knows how much longer that will last for though. “The Final Surge.” was the latest release monthly sales & price title for the Montreal Real Estate Association.

It is still a seller’s market at this point, but the shifting balance of market power is starting inch the other way. The indications are more subtle ie. the ratio of sales to new listings. We will wait to see how the typical peak spring home-buying season plays out.

“The spring market happened in February this year,” said Tom Storey, a broker who works in Toronto. “You’re not seeing every house that sells on the street, or every condo that sells in a building, sell for more than the last comparable. You’re starting to see some sell under.”

Reza Sabour (Vancouver mortgage broker), says buyers have already seen their purchasing power drop about 10% over the past month or so.
“There’s definitely going to be shock waves if rates continue like this,” he said.

Let us know your thoughts on the Canadian Real Estate Market in the comments. Do you believe we are at the TOP or do you think it will continue to climb?