Canadian Housing Market Navigating Recessionary Terrain and Shifting Dynamics

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According to CIBC's report, the Canadian housing market is currently experiencing a downturn comparable to the challenges faced during the country's recession in 1991. Since early 2021, unit sales have plummeted by 45%, dropping below the pre-pandemic decade-average by 12%. This decline is more pronounced on a per capita basis, with sales levels, except for the early pandemic lockdowns, sinking even lower than those witnessed during the 2008 recession. Major urban centers like Toronto and Vancouver, known for their inflated housing markets, are particularly affected, alongside regions experiencing population growth, such as the Prairie and Atlantic areas.

Despite the Bank of Canada not planning to increase rates further, CIBC experts anticipate a deepening of the downward trend, differing from the rapid rebound experienced after the rate hike pause in January. The benchmark home price has fallen by 11% from its peak in early 2022, though it remains significantly elevated at 38% above pre-pandemic levels. Notably, single-family home prices have surged past condominium prices during the low-interest-rate pandemic phase, marking a 42% increase compared to the pre-pandemic levels, while condominium prices rose by 30%. This surge was sustained by a scarcity of new property listings, with a decline of over 31% from early 2022 to early this year.

However, the situation has evolved recently as new property listings have surged by 31% from a 19-year low in March (excluding pandemic lockdown periods). This surge is partially attributed to more homeowners listing their properties due to rising mortgage payments and other financial challenges. Consequently, the housing market is shifting from seller-dominated conditions to more balanced conditions, with the potential to move towards buyer-favorable conditions in some areas like Toronto and eventually Vancouver. Despite these evolving conditions, affordability issues persist, which might limit a substantial increase in demand despite the shift towards more favorable conditions for buyers.

Read the full article on: REAL ESTATE MAGAZINE