According to a CIBC Capital Markets report released this month, the average national home price has dropped by $110,000 since the peak in early 2022.Alfieri/iStockPhoto / Getty Images
These are anxious times in the Canadian real estate market.
According to a CIBC Capital Markets report released this month, the average national home price has dropped by $110,000 since the peak in early 2022. Last month, the average selling price for a Toronto home came in below the psychologically significant barrier of $1-million for the first time since 2021.
That’s encouraging prospective buyers who once considered themselves priced out to have a look. But as Carolyn Ireland wrote this week, it may also be tempting for those buyers to wait and see how low prices can go in cities such as Toronto.
Clients who purchased a home – or a second property – during those heady COVID-era days of low interest rates and profound claustrophobia will not be enjoying this correction. A vacation property may have felt essential during the lockdowns of 2021, and why not at 2 per cent interest? The equation is different with those mortgages renewing.
Some clients may be finding that old assumption – that owning a property for five years will result in a profit – to be cruelly dated. That’s especially true for condo owners who’ve seen their property values drop, along with the possibility of renting units at a price that will cover mortgage payments.
The rental market downturn is also affecting investors. Average asking rents in Canada have fallen for 16 months in a row. Furthermore, apartment REITs are facing headwinds of declining immigration, higher interest rates and new supply, and some private real estate funds are limiting redemptions.
With all that in mind, we thought it was a good time to examine Canada’s shifting real estate market and the advice for clients in various situations.
Some are regretting purchases and making difficult choices.
“There was a pretty significant fear of missing out, and people who were stretching to buy more real estate than they could afford,” Jason Heath, managing director with Objective Financial Partners Inc. in Markham, Ont., told Brenda Bouw in the first article in our series that ran this week.
Other clients accustomed to decades of home values rising may be feeling a reverse wealth effect and tightening their belts.
The bright side of a housing correction, of course, is the opportunity for buyers.
Rob Carrick wrote this week that the housing slowdown could be a chance for young do-it-yourself investors to take recent stock market gains and put those funds toward a down payment. It’s more than a little strange to think of housing as an undervalued asset.
With more registered accounts from which to draw, helping clients save and plan a tax-efficient home purchase is more valuable than ever. There’s also the emotional support for clients making a very important decision, and the practical value of referring real estate agents, mortgage brokers and lawyers.
Over the coming weeks, we’ll be looking at what the real estate market means for owners, buyers, landlords and investors. What are the most common real estate questions you’re getting from clients? Let us know.
- Mark Burgess, Globe Advisor assistant editor
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