After hitting record highs the past few years, it’s true that home prices in Canada are finally dropping—if you’re wondering if this could be the right time to buy, you might also have a few important questions. Here are some helpful answers about the current real estate market.
Why are home prices dropping?
While Bank of Canada interest rates hit a historical low in 2020, this year, the rate has already been hiked five times in an attempt to combat inflation. The Bank of Canada interest rate currently sits at 3.25%. As mortgage rates are affected, this jump in interest rates has contributed to slowing home sales.
How much are home prices dropping in Toronto?
From the market housing peak in February, the average house value has declined by more than $400,000 (a difference of 24%). It’s important to note that home sales volume has also dropped. In Toronto, the number of home sales is down 47% compared to last July.
How much more are home prices expected to drop?
Experts, including Canadian banks, expect prices could drop between 20–25% from their peak by early 2023.
What types of homes are dropping in price?
While the price of detached homes has come down the most, not all property types are affected equally. According to data from the Toronto Regional Real Estate Board (TRREB), “Less expensive home types, including condo apartments, experienced stronger rates of price growth as more buyers turned to these segments to help mitigate the impact of higher borrowing costs.”
What else should I consider if I’m thinking of buying a home now?
You might think that there’s a big rush to buy a home now that prices have dropped. However, there are other economic factors impacting people’s purchasing decisions, such as the increased cost of living, and the higher interest rates that affect mortgage payments—don’t forget about the stress test. As well, if more people decide they want to capitalize on the market this fall, demand could increase and lead to more competition, once again.