TORONTO (CU)_Throughout the pandemic last year there was a significant rise in real estate demand, particularly induced by low interest rates, as well as lockdowns which emphasised the need for bigger homes. This was the case in countries around the world, including Canada. However, the constrained supply of housing in the North American nation, which led to intense price appreciation and bidding wars, prompted the Bank of Canada and the federal government to alter mortgage qualification rules.
Now, despite being one of the hottest housing markets in the world, Canada is seeing back-to-back decline in sales and slowing price gains. “We now have two months of moderating activity in the books, and that goes for demand, supply and prices,” Cliff Stevenson, chair of the Canadian Real Estate Association, said in a statement. “More and more, there is anecdotal evidence of offer fatigue and frustration among buyers, and the urgency to lock down a place to ride out COVID would also be expected to fade at this point given where we are with the pandemic.”
According to experts, the record surge in demand pushed home prices further in Canada, in terms of both incomes and rent, and as a result buyers have found themselves priced out of the market. This has been further exacerbated by mortgage rates beginning to tick up with bond yields. On the other hand, with lockdown measures beginning to ease, some of the dynamics which fuelled the frenzied pace in the market last year appears to be shifting.
According to data released by the national real estate association on Tuesday (15 June), following the 11 per cent drop in home sales in April, the figure in May declined further to 7.4 per cent. Although there was a rise in new home construction last month, these gains were only from the condo segment. A report issued by the Canada Mortgage and Housing Corp. revealed that price gains over the pandemic was also down 12 per cent nationally, while in urban areas, an 18 per cent drop was recorded.
