Calgary, Vancouver housing markets extend losses as rate hikes put pressure on real estate

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The Calgary market is beginning to turn as home sales fell for the second straight month

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06/02/20223 days ago3 minutes read 5 comments A real estate for sale sign in Calgary. A real estate for sale sign in Calgary. Photo by Azin Ghaffari/Postmedia Files

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Housing markets in Calgary and Vancouver are showing signs of an ongoing slowdown as Bank of Canada rate hikes appear to weigh on mortgage demand.

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After the Calgary market posted an all-time record high in home sales in March, the Calgary market is beginning to turn as home sales declined for the second straight month, falling nearly 10 percent to 3,071 in May, according to data from May dated Calgary Real Estate Board. However, the board added that this still represents a 6 percent gain from the same time last year and a record high for April.

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Despite the drop in sales, the benchmark home price in Calgary rose nearly four percent month-on-month to $546,000 in May and is up more than 14 percent from the same time last year.

The board noted that these sales still represent a historically high level for the city as it recovers from years of low home prices following the oilfield downturn.

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“Despite some of the monthly decline, it’s important to note that sales remain exceptionally strong and will likely be limited due to supply selection in the market,” CREB chief economist Ann-Marie Lurie said in a press release. “While further rate hikes are likely to dampen demand later this year, further falls in new registrations this month will keep the market favoring the seller, leading to further gains.”

Calgary has been a pandemic success story, as low interest rates and inflated prices in markets like Toronto and Vancouver brought buyers to Alberta. Even as these overheated markets lost some of their momentum as interest rates rose, Calgary continued to see demand from out-of-province buyers.

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The slowdown is also playing out in Vancouver, where both sales and prices plummeted in May.

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The Real Estate Board of Greater Vancouver found that residential home sales fell nearly 10 percent from April to 2,918 units sold in May. It was also down around 32 percent from the 4,268 sales recorded in May last year.

The board’s reference price for all residential property in the Vancouver metro area was $1.26 million in May, relatively flat from April, down 0.3 percent, although it is up almost 15 percent year-on-year.

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“In today’s housing market, with interest rates rising, homebuyers are taking more time to make their decisions,” said REBGV Chairman Daniel John in a press release. “For much of the past two years, homebuyers have operated in a hectic environment. This spring offers a calmer environment with fewer multiple bid situations, allowing buyers to explore their housing options, understand the changing mortgage market and conduct their due diligence.”

John added that house prices had started to ease over the past two months, although further developments depended largely on housing availability. John argued that housing supply would need to more than double to “bring the market close to balanced territory”.

Housing markets across Canada have emerged from their pandemic highs as the Bank of Canada hiked interest rates to fight inflation. This dragged mortgage demand into late 2021 as homebuyers flocked to secure lower interest rates. As borrowing costs begin to rise, more Canadians are sitting on the sidelines weighing their options or choosing not to participate at all.

• Email: [email protected] | Twitter: StephHughes95

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