Buyers are in the “driver’s seat” in almost all of Ontario’s real estate markets and the “sluggish” conditions are likely to persist into 2024, a recent report from RBC suggests.
In the report, released on Dec. 14, the bank said that the MLS home price index in Toronto was down 1.7 per cent in November and has now been declining since August amid “softening demand-supply conditions” brought about by the Bank of Canada’s aggressive interest rate hiking campaign.
Buy/sell, rent/lease residential &
commercials real estate properties.
RBC says that prices in the Toronto area, as measured by the index, are virtually unchanged from November 2022 (up 0.1 per cent) but have been declining on an “accelerating basis” in recent months.
The downturn, however, isn’t just limited to the costly GTA market.
RBC says that buyers are essentially in the “driver’s seat in almost all Ontario markets,” meaning that new listings are significantly outpacing sales.
A similar phenomenon is also being observed across parts of British Columbia, RBC said.
“Most markets are now in correction mode with high interest rates, the loss of affordability, and mounting economic uncertainty holding back homebuyer demand, and supply-demand conditions having significantly eased since spring,” the report states. “With interest rates likely to stay high in the near term, we expect elevated ownership costs to remain a deterrent for homebuyers. That should keep activity very soft in Ontario and B.C. – where affordability is most stretched.”
The average price of a home across all property types in the GTA peaked at $1,334,062 in February 2022, prior to the Bank of Canada’s first interest hike.
Average prices eventually dropped to a low of $1,037,542 but rebounded in the spring amid temporary declines in fixed-mortgage rates.
In its report, RBC said that home resales have now declined 13 per cent since June “reversing almost entirely the spring rebound.”
It said that it expects the downturn to linger in to 2024 as “elevated ownership costs remain a deterrent for homebuyers.”
“Property values are coming under increasing downward pressure across large parts of Canada. This is particularly the case in Ontario,” the bank said.
While the Bank of Canada’s overnight lending rate is at a 22-year-high, many economists are predicting that rate cuts could come as early as the second quarter of 2024.
It is, however, unlikely that the country will return to the emergency rates that were in place at the outset of the COVID-19 pandemic.