Spring is quickly approaching, and with it, the real estate market’s typical peak season. However, ‘typical’ might not be the word of choice when referring to this year’s spring real estate market. New interest rates, fluctuations in buyers and sellers, and record-high prices are all contributors to the current state of the Ontario real estate market. The extreme lack of inventory is making it tough for Canadians to buy property. This is especially true, for citizens of Ontario. Follow along below to learn more about the current state of Ontario’s real estate market. And, to find out how the Bank of Canada’s interest rate hike will affect the real estate industry.
What to Expect From Ontario Real Estate this Spring?
Traditionally, spring indicates a prosperous season for those in the real estate industry. Although, given an extreme lack of inventory and new interest rates, this may not be the case. In London, Ontario, January marked the second-best year-over-over record. Any new listings that surface on the market are generally being sold within a week, according to one CBC article. Finding a home is a difficult task for most, especially given the extremely competitive nature of the market. Canadians are hopeful that more inventory will come available in the approaching months.
A severe shortage of homes and extreme demand from buyers are issues that need to be addressed in order to restore the market. This is only exacerbated by new people moving to Ontario and not contributing new inventory. In Ottawa, the high price and multiple offers are making it difficult for citizens with high income and great credit to purchase a home.
Signs of a cooling off?
On the contrary, a recent article by the Financial Post indicated that the real estate market might be showing signs of cooling-off. In February, there was an increase in sellers entering the market across the country. It is hard to tell this early on if sellers will continue to add to the inventory, however, Canadians are optimistic. This is not to say that housing is becoming any more affordable, but there is a possibility that more homes will be entering the market. At a minimum, this will provide more opportunities for buyers.
New Interest Rates Affecting Ontario Real Estate:
On March 2nd, 2022 the Bank of Canada raised the key interest rate to 0.5%. This is the first time since the start of the pandemic that the bank has changed the interest rate. During the first few months of COVID-19, the Bank of Canada cut the interest rate to 0.25%. This was done in order to help out the economy given the circumstances. Now that economies are bouncing back from the effects of the pandemic, the bank decided to start to raise the key lending rate. The increase on Wednesday was rumoured to be the first of many small hikes throughout the duration of 2022.
Many banks have already begun to respond to the hike in the prime rate by increasing their own lending rates. TD and the Royal Bank changed their rates from 2.45% to 2.7%. These changes impact anyone with a mortgage, line of credit, or savings accounts at their banks.
Who does this affect the most?
For those in the real estate industry, the key rate change is likely to affect investors and buyers who have now purchased a home that is out of their affordability range. Investors are more likely to wait until things cool off. Anyone who purchased a home that would’ve been out of their affordability range a few months ago could start to find it hard to pay monthly mortgage payments given the new rates. Citizens in this situation could be forced to sell their homes, however, it is unlikely that this will happen until the end of 2022.
“Just two years ago, you could get a townhouse for $500,000 with a monthly mortgage payment of about $2,000. Today, that same townhouse sells for $650,000. Add the higher interest rate and you’re now looking at almost $3,000 per month,” wrote CTV in an article.
The future of Ontario real estate this spring remains uncertain, but real estate agents and citizens are hopeful that things start to balance out.
Contact Us About Ontario Real Estate Today!
If you are curious about what Ontario real estate will be like in the spring contact us today! Put your home up for sale this spring and make a profit off of your real estate investment. For a more in-depth look at interest rates and how they will affect your current situation, reach out to us today.
At The MYLIE Group, we have connections to several experts that can help you get your real estate goals on track! We look forward to making your life insanely easier this spring. Check back with us next month for more real estate-related news and information.