Canada’s real estate market sees an uneven recovery, with prices down in Toronto but up in Montreal, new report says

Canada’s real estate market sees an uneven recovery, with prices down in Toronto but up in Montreal, new report says

Roger Pettingell Sarasota Real Estate

Canada’s real estate market is undergoing an uneven recovery, as home prices plunged in Toronto and Vancouver while regions such as Montreal and Windsor-Essex saw significant price growth from the first to second quarter of this year, according to a new report.

The House Price Survey by Royal LePage says the aggregate price — which is calculated using a weighted average of the median values of all housing types collectedof a home in Canada increased 12.1 per cent year-over-year to $815,000 in the second quarter of 2022.

But the aggregate price of a home decreased 4.9 per cent from record highs in the first quarter — the first time in more than three years there’s been a decline quarter-over-quarter.

The decline represents a softening in markets that saw exceptional price growth during the pandemic, the report says.

“An uneven market is normal, it’s very common for the market to be good in Montreal but poor in Calgary, for example. It was highly unusual for those 18 months in the pandemic where everywhere in the country got a lift,” said Phil Soper, president and CEO of Royal LePage.

In Toronto, the average selling price for all houses and condos in June was $1.15 million, down from the February market peak of $1.33 million and the May average of $1.21 million, according to Toronto Regional Real Estate Board.

“Prices are down in Toronto and Vancouver and that’s rare,” Soper said, noting the drop is largely due to fewer sales as more buyers and sellers wait on the sidelines, watching the market as the Bank of Canada hikes rates to offset soaring inflation.

Royal LePage predicts the national home price growth to be five per cent for the year down from an initial 15 per cent growth forecast in its first quarter report. The forecast follows the Canadian Mortgage and Housing Corp., which on Monday revised its forecast saying a surge in interest rates could bring down national home values down by five per cent by the middle of 2023, but would not lead to a collapse in prices.

“We think the majority of the price correction occurred in the first and second quarter of 2022,” said Soper. “Prices are likely to plateau as the number of people looking for homes and those willing to put them up for sale balances.”

Greater Toronto Area

The aggregate price of a home in the GTA increased 12.8 per cent year-over-year to $1.16 million in the second quarter of 2022 compared to more than $1 million during the same time last year, according to the report. On a quarterly basis, the aggregate price of a home in the GTA decreased 8.1 per cent in the second quarter — the first quarterly decline in the region since the first quarter of 2018.

The GTA and many secondary cities in the Golden Horseshoe saw housing demand slow in recent months as buyers took a step back in an attempt to time the market, Karen Yolevski, chief operating officer, Royal LePage Real Estate Services Ltd. said.

“For the first time since the start of the pandemic, the real estate market is experiencing a more normal summer slowdown in activity.”

Greater Montreal Area

The aggregate price of a home in the Greater Montreal Area increased 13.9 per cent year-over-year to $585,000 in the second quarter of 2022 from $514,000 last year. A single-family detached home increased 18.1 per cent to $660,000, while the median price of a condominium increased 11.7 per cent to more than $452,000.

The average home price from the first quarter to the second quarter increased by 2.5 per cent.

Higher interest rates led buyers to “seriously reassess their financial capacity, which reduced their enthusiasm and slowed down demand for properties in June,” said Marc Lefrançois, licensed real estate broker at Royal LePage Tendance in Montreal.

However, sellers are not adjusting their expectations as quickly, resulting in higher home prices, he added.

Greater Vancouver

The aggregate price of a home in Greater Vancouver increased 9.1 per cent year-over-year to $1.3 million in the second quarter of 2022, up from $1.2 million during the same time last year. Greater Vancouver posted a quarter-over-quarter decline in the aggregate home price, down 4.1 per cent over the first quarter of 2022 — the first decline since the third quarter of 2019, the report says.

“We are seeing an uptick in average days on market, buyers are taking a step back and putting conditions into their offers again, and sellers are no longer holding back offers,” said Randy Ryalls, general manager of Royal LePage Sterling Realty.

Ottawa

The aggregate price of a home in Ottawa increased 11.5 per cent year-over-year to $800,000 in the second quarter of 2022, up from $718,000 last year. On a quarterly basis, the aggregate price of a home in Ottawa decreased 1.1 per cent in the second quarter of 2022.

“Despite recent interest rate hikes and increasing home prices, buyer demand remains strong in the city of Ottawa,” said John Rogan, broker of record, Royal LePage Performance Realty. “Inventory is beginning to creep up slowly, but demand continues to outpace supply.”

Windsor-Essex

The aggregate price of a home in Windsor-Essex increased by 5.9 per cent year-over-year to more than $555,000 in the second quarter of 2022, up from $525,000 last year. From the first to second quarter, the aggregate home price also increased by 6.5 per cent.

“Big cities like Toronto and Vancouver feel the brunt of interest rate hikes so the percentage increase quarter-over-quarter was greater in more affordable markets like Windsor,” said Soper.

While detached homes saw a major boom during the pandemic as more space became a premium demand, Soper said condos will appreciate more as people return to the cities for the next year.

“The secondary cities (like Windsor) are beginning to see the shine wear off,” he said. “This will be an upside for condos (in big cities) compared to detached homes.”

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