The Bank of Canada's upcoming decisions will have an outsized impact on condo market dynamics, RE/MAX says
The ever-present possibility of further interest rate hikes could herald the premature end of the resurgence in condominium activity in major markets across the country, according to a new analysis by RE/MAX Canada.
“Recent economic indicators [suggest] that Canadian homebuyers could be facing increasingly strong headwinds in the form of further interest rate hikes,” RE/MAX said in its latest report on the condo sector.
While condo sales in May, June, July and August were visibly stronger, the figures were still considerably outstripped by year-to-date 2022 levels.
“Overall sales in the condominium segment fell in all but two markets in the first eight months of 2023, with Calgary climbing a substantial 22%, and sales edging up a nominal 3% in Edmonton year-over-year,” RE/MAX said. “Alberta markets are the outliers, with their affordability attracting interprovincial migration at a staggering rate.”
During the same period, average prices were steady in Greater Vancouver, Calgary, and Halifax-Dartmouth, and declined in the Fraser Valley, Edmonton, the Greater Toronto Area, and Ottawa.
“Higher borrowing costs, combined with the minimum qualifying rate of 2% added by the stress test, contributed to lower condominium market share in three of the seven markets, including Greater Vancouver, Fraser Valley, and Ottawa,” RE/MAX said.
Lauren Haw of Zoocasa, anticipates that the real estate market will experience increased activity once fall begins, despite a slight cooling in national sales in July. https://t.co/zrbZWrehUg#mortgageindustry #housingmarket #houseprices
— Canadian Mortgage Professional Magazine (@CMPmagazine) August 30, 2023
Affordability remains top of the mind for condo would-be buyers
Despite some softening in overall prices, current carrying costs are proving to be a significant challenge for many buyers at today’s interest rates, RE/MAX said.
“Current qualifications for mortgage financing are a roadblock to home ownership, given the stress test adds another 2% to already high posted rates,” RE/MAX said. “Not surprisingly, the most active areas in every market are often those areas where affordable condominium product can be found. First-time buyers and investors remain most active in condo markets, with lower price points doing well virtually across the board.”
Another element that could spur price growth over the next few years is immigration, and inter-provincial migration, in particular.
“In Alberta markets… affordability and a lower cost of living proved irresistible to buyers in more expensive provinces – namely Ontario and British Columbia,” RE/MAX said.
“While Ontario welcomed 125,000 international migrants in Q1 2023, the province registered a decline of 14,732 in inter-provincial migration. Out-migration was the largest on record since 2000. British Columbia received 40,840 international migrants but lost 712 residents.”
