#One country, one product #Financial people sing the decline of Canadian house prices! Could plummet by 20%
Canada currently has one of the highest housing prices in the world, not only in large cities, but also in small and medium-sized cities. At this juncture, even if house prices fall sharply, many people still can't afford to buy them.
Many people believe that the epidemic has caused market prices to soar, but in fact, Canada has always had the problem of overvalued house prices. For at least 10 years, central banks, governments and various other institutions have issued warnings about overvaluation. The problem is that everyone is warning that house prices are overvalued, but no one is taking real action.
Peter Routledge, the custodian of Canadian financial institutions, said house prices in some markets could fall by as much as 20 percent when Canadian banks raise their benchmark overnight rates, according to Toronto Life.
"My expectation is that as interest rates go up — assuming they do — that heat will diminish a little bit and you'll see a slowdown in prices," Routledge said. "In some markets, if your price is really going up fast, you're probably going to see a 10 percent, a 20 percent drop, or even that. It will be a kind of regression, and I don't want to say it's normal, but a return to sanity after the price has suddenly accumulated. "
"By the way, we went through 2015, 2016 in Vancouver, and then in Toronto in 2016, 2017, and we're talking about a 10-20 percent decline from peak to trough."
The Bank of Canada cut its overnight rate to an all-time low of 0.25% in March 2020, encouraging many potential buyers to buy homes. This, in turn, increases competition in many markets where inventory levels are already low. The bank has maintained that rate since then, but expects an increase this year, with the next announcement coming on March 2.
Routledge's forecast contrasts with those of many real estate industry leaders: a noticeable price increase across the country, albeit at a slower pace. The Canadian Real Estate Association predicts a national price increase of 7.6% in 2022, predicting that the national average house price will rise to $739,495. Royal Land expects house prices to jump 12% in Vancouver and 11% in the Greater Toronto Area.
It is often said that buying a house is the best retirement investment. Let house prices fall, on the surface, it is unfair to people who retire by buying a house for the elderly, but if the appreciation of house prices in one year is equivalent to doubling the income of an ordinary family, it is not impossible to let house prices fall a little.
Others say that falling house prices will put retirees in trouble. The problem is that if house prices continue to rise like this, the whole country will be dragged into trouble, and now the 2 generations basically rely on the little family property accumulated by their parents' generation of real estate. The latest OECD housing market forecasts point to the bottom of the Canadian economy among OECD countries over the next 40 years.
Home sales at GTA may have fallen 18.2 percent last month, but the average selling price has never increased.
A January Market Watch report released by the Toronto Regional Real Estate Authority (TRREB) showed that 5,636 homes in the GTA area changed hands last month. While down from the record 6,888 home sales in January 2021, it still holds the second strongest January record ever recorded in the GTA region.
With sales falling, prices for all home types have risen significantly compared to January last year.
"Continued tight market conditions have resulted in a 33.3 percent annual increase in the MLS Home Price Index Composite Benchmark," the report reads. "Similarly, the average selling price increased by 28.6% year-on-year to $1,242,793."
The average selling price of a detached house in January was 1,741,318 yuan, an increase of 28.3% year-on-year. The biggest change was in townhouses, with an average price of $1,083,000 – up 34.8% compared to January 2021.
As expected, the largest block sale occurred in Toronto, where it accounted for 2,247 transactions in January, with an average selling price of 1,073,111 for all home types. It was followed by Brampton, with 603 sales in the city, with an average price of $1,367,444.
The decline in sales was related to the decline in newly listed homes, which fell by 15.5% year-on-year. At the end of January, the total number of active listings was only 4140, the lowest level in more than 20 years. Limited inventory levels have been the main reason for the rapid rise in house prices, with buyers competing fiercely for homes on the market, and there has been a rush for "offers".
Looking ahead, TRREB predicts that sales for the full year of 2022 will be lower than in 2021 levels, but will remain strong compared to previous years. The average selling price for the full year is expected to jump 12% compared to 2021, reaching a new high of 1.225 million yuan.
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