Home price drop hits 15% in Canada as rates squeeze buyers
CANADIAN home prices fell for an 11th straight month as rising interest rates continued to limit what prospective buyers can afford, ramping up pressure on the country’s housing market.
The national benchmark price for a home declined 1.9 per cent to C$714,700 (S$713,047) in January from December, according to data released on Wednesday (Feb 15) by the Canadian Real Estate Association. It’s down 15 per cent from last year’s peak.
The Canadian housing market has seen an abrupt reversal from its frenzied pandemic days as the central bank started raising interest rates last year to combat inflation. The fast rise in borrowing costs has priced out buyers, squeezing affordability even with prices down.
Sales fell 3 per cent in January from the previous month, while the number of new listings rose 3.3 per cent, keeping downward pressure on prices, the real estate board data show.
That came as the Bank of Canada raised its benchmark interest rate again to 4.5 per cent at its January meeting. The benchmark rate was just 0.25 per cent last March, making for one of the quickest increases in borrowing costs in Canada’s history. But the central bank has signalled that it might now pause to see how the economy and consumers are handling the increases.
“Hope springs eternal that housing activity may be close to a bottom, but we suspect that the market is still digesting the incredibly aggressive rate hikes of the past year,” Doug Porter, chief economist at Bank of Montreal, said in a report to clients about the latest data. “Accordingly, we look for some further price softness nationally in the months ahead.”
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In Canada’s last seven housing corrections, it took three years on average for prices to hit bottom, Porter added, noting the market is now only a year out from its peak.
Despite the increase in supply in January, the number of houses available for sale across the country remains constrained. The number of homes that hit the market last month was the lowest for the month of January since 2000, and the 4.3 months worth of inventory currently available for sale nationwide is still about a month less than that measure’s long-term average, real estate board data show.
“We may have to wait another month or two to see what buyers are planning this year since new listings are currently trickling out at near-record low levels,” Jill Oudil, chair of the national real estate board, said in a press release accompanying the data. “But that should change as the weather warms.” BLOOMBERG
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