Prospective home buyers in the GTA may be wondering when they should expect the decline in home prices and sales to bottom out after the Bank of Canada raised its key overnight lending rate for the eighth consecutive time.
While higher mortgage rates have put buyers and sellers on the sidelines, the Bank of Canada’s announcement on Wednesday also signalled its rate-hiking campaign could finally be over as inflation eases. This should give buyers more certainty regarding interest rates and, come spring, prices are expected to stabilize as buyers return to the market, economists and real estate experts say.
“In the spring we will see some buyers that were waiting to see where interest rates land come off the sidelines,” said Karen Yolevski, chief operating officer of Royal LePage.
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“At the same time, we know that, historically, the GTA has been plagued by low supply, and if an influx of buyers looking to get into the market do step up in the spring, that’s going to create some additional competition.”
After a year of continuous interest rate hikes, average home prices in Canada dropped a record 12 per cent in 2022, while sales fell more than 39 per cent from December 2021, according to a recent report from the Canadian Real Estate Association.
In the Greater Toronto Area, the average home price in December was $1,106,000 — a 1.1 per cent decline from November and an 8.9 per cent from the previous year. The average national home price in December was $626,318, down from more than $816,000 when the market peaked in early 2022.
Robert Kavcic, chief economist at BMO Capital Markets, also expects Toronto home prices to bottom out by late spring, while other markets across the country might take a bit longer. Kavcic expects buyers to now have more confidence in the market moving forward.
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“What the Bank of Canada did (last week) was not only raise rates but, more importantly, they clearly told Canadians that they’re done raising those rates, which helps the psychology and confidence of buyers that rate hikes have stopped,” Kavic said.
