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“The only thing that matters right now is the interest rates”
Published on Oct 8, 2023 • Last updated 3 days ago • 3 minutes reading time
A “For Sale” sign is posted outside a home in Toronto’s Riverdale neighborhood. Photo by Evan Buhler/The Canadian Press Files
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Lower interest rates could be the only thing that could revive Canada’s real estate market as supply outstrips demand in the country’s largest real estate markets, experts say.
For example, home sales in Toronto plummeted as new listings surged in September. According to the Toronto Regional Real Estate Board (TRREB), sales fell 12 per cent compared to August and 7.1 per cent year-over-year. There were also 16,258 new entries, an increase of 32 percent compared to August and 44.1 percent more than a year ago.
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According to data from the Real Estate Board of Greater Vancouver, Vancouver saw a similar increase in inventory last month with 5,446 new listings, a 28.4 per cent increase from September 2022. September sales totaled 1,926, an increase of 13 .2 percent compared to the same month last year, but still below the 10-year seasonal average and a decrease of 16.1 percent compared to August.
“Sales are really weak, technically up year-over-year, but compared to a terrible September 2022,” said Steve Saretsky, a real estate agent at Oakwyn Realty Ltd. in Vancouver, in an interview with Larysa Harapyn of the Financial Post.
Prices are up in both Vancouver and Toronto compared to the same period last year, but weak sales coupled with high inventory levels are starting to put downward pressure on prices.
The average price in Toronto rose about three per cent month-over-month and year-over-year to about $1.1 million. The benchmark composite home price in Metro Vancouver was $1.2 million, up 4.4 per cent from the same month last year but down 0.4 per cent from August.
“Interest rates will be the primary driver of real estate prices over the next 12 months,” John Pasalis, president of Realosophy Realty Inc. brokerage in Toronto, said in the same interview.
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He believes longer-term factors such as immigration will not have an impact on the market until the economy emerges from its current high interest rate environment.
“These will not help the real estate market in the short term,” Pasalis said. “The only thing that matters right now, frankly, is interest rates and the impact they are having on the number of people buying homes, which are incredibly low, and the number of people being forced to sell because they have expired.” -levered.”
Saretsky agreed: “In the short term, a 6.5 percent mortgage rate will trump developments on the immigration side.” Structurally, I still think we’ll be talking about housing affordability or lack of housing in the next five to 10 years.
He added that the rapid changes in interest rates will also impact the supply of new housing.
“The huge rise in interest rates will slow down new construction and I think it will ultimately hurt demand for housing and developers will pull out,” he said.
Looking ahead, Pasalis does not expect the federal government’s spring budget to revive the real estate market.
“The big driver right now is interest rates, and there’s not much the Feds can do to get around that,” he said.
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In the meantime, Saretsky hopes Ottawa revises its “ambitious” immigration goals.
“A million is a little bit too aggressive because I think our real estate market hasn’t been able to keep up with that level of growth,” he said.
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