The aggressive path of rising interest rates continues to weigh on Canadian housing markets with home sales and prices falling in July.
Vancouver and Calgary both saw home sales decline as more buyers moved to the sidelines and waited for a better opportunity to return to the market. It comes as the Bank of Canada raises interest rates to combat inflation, including a full percentage increase in July.
The number of swap homes in the Greater Vancouver area fell nearly 23 percent in July from the previous month, with 1,887 units sold. Sales are down 43 percent from last summer when the Vancouver market was in the midst of a buying spree, according to data from the Greater Vancouver Real Estate Council.
The board’s benchmark price index, which aggregates typical property prices in each market, is about $1.2 million, down 2 percent from June.
“Home buyers are being extra cautious in the market today in response to higher interest rates and inflationary concerns,” REBGV Chairman Daniel John said in a press release accompanying the data. “This has allowed selection of homes for sale and price increases in the area over the past three months.”
Home sales in Calgary fell for the second month in a row with a 3 percent drop in July from a year earlier, according to data released by the Calgary Real Estate Board on Tuesday. This is a turnaround for a market that did better earlier this year as home buyers from Toronto and Vancouver moved to look for more affordable options.
The median home price in Calgary was $491,392 in July, up 0.6 percent from a year ago.
While many in the real estate industry have blamed higher interest rates for lower demand, Leah Zlatkin, a mortgage broker at LowestRates.ca, said the pause in home buying has more to do with recession risks and general uncertainty.
“You have to be careful assuming that an overnight Bank of Canada rate hike really affects the whole market and I don’t think that is what is really causing people to hesitate,” Zlatkin said. I think the thing that’s causing people to hesitate is lower housing prices and uncertainty about whether or not a recession is coming. A job loss is more of an impact on mortgage payments than an increase in the actual rate.”
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More homebuyers are sitting on the sidelines as they wait for more certainty in the market, Lauren Howe, CEO of Canadian real estate agency Zukasa, told the Financial Post Larissa Harrabin in July.
“Everyone is waiting for you to tell them this is the bottom and then they rush in and turn into a spare high,” Howe said in an interview on July 12. “So, the real question will be: … will we get to the bottom … and it is time to buy, which creates a kind of period ahead? Or are we going to get to the situation where it becomes a bit more balanced or it is a protracted buyers market and it will take a few years to recover?”
“Admittedly, I don’t have a crystal ball,” Howe continued. “But I think in 2022, we’ll see he’s still very calm.”
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