With recent interest rate hikes by the Bank of Canada, we’re seeing a shift in the Canadian real estate market. While interest rates were still historically low at the beginning of 2022 at 0.25%, the Bank of Canada has raised the rate four times since March so that it currently sits at 2.5% — and experts expect it to continue to rise in order to combat inflation.
We certainly experienced a strong seller’s market throughout the pandemic, which led to historic housing prices in Canada — but is that changing? Read on to find out.
What is a buyer’s market?
A buyer’s market means there are more homes for sale than there are buyers, which gives buyers more leverage than sellers. In a buyer’s market, house prices tend to be lower, homes sit on the market for longer, and buyers have more power to negotiate when purchasing a home since they have more options to choose from.
How is a seller’s market different?
In a seller’s market, the opposite occurs and sellers have the power. There is less supply than demand, meaning there are fewer homes on the market, giving buyers fewer options and therefore less leverage if they want to purchase a home. In a seller’s market, homes sell quickly and bidding wars drive prices up.
Are we in a buyer’s market now?
While we’re not necessarily there yet, there are signs of the market swinging in the direction of a buyer’s market, especially in some areas. This past April, home prices across Canada dropped by 0.6% from the previous month — the first decline in two years. Markets outside of Toronto where prices really skyrocketed during the pandemic — like in the Durham and Halton regions — are seeing the biggest shifts towards a buyer’s market.
And though the market seems to be balancing out in Toronto as total home sales are down, the average home price is still increasing over last year. Buyers may also be holding back at the moment to see how the market unfolds, meaning there could be an influx of demand coming. Time will tell whether we see a true buyer’s market, and if we do, whether it will last.
Want to learn more about what this means for you if you’re thinking of buying or selling? Let us guide you.