Many economists expect a correction in real estate

If you don’t plan to sell without buying afterward, Jan Sussville advises putting your building up for sale quickly. (Photo: Getty Images)

guest blog. Economists expect a price correction in Canada: 10% in Capital Economics, 10%-20% in OSFI, 15% in Desjardins, 15%-20% in CIBC, 20% in BMO Capital Markets and 24% in Oxford Economics.

Each domestic market is also expected to have different levels of decline. For example, the price drop in Montreal should be higher than the price drop in Quebec City.

market pulse

Since the beginning of the year, there has been a steady rise in active listings and a steady decline in sales under the Centris system.

“Market conditions, in general, remain very tight, and the percentage of properties sold as a result of the bidding process so far shows no sign of weakening, possibly because a large percentage of buyers are still shopping at mortgage rates guaranteed by a financial institution,” said Charles Brant, Division Manager APCIQ market analysis, as long as the bidding level is high, we cannot see a decline in prices.

“It is inevitable that the slowdown in price growth will be increasingly felt over the coming months, given the change in market dynamics and increased exposure of new buyers to particularly high fixed and variable interest rates, thus reducing the pool of buyers who could be eligible for a mortgage loan,” The director continues.

The correction in Quebec should not be severe, unless there is a recession

“Evolving models are unlikely to accurately predict how the market will behave over the next 24 months, in the same way that they weren’t able to predict price increases during the pandemic,” Charles Bran said.

In fact, no one has a crystal ball. We are already seeing significant price drops in Toronto. I would expect a more moderate level of lower prices in Montreal. I wouldn’t be surprised if the correction percentage is between 5% and 10%.

“The situation is currently unprecedented in that bidding has never reached the levels we currently know in the market. In addition, the market is structurally protected from a major and lasting shift, given the large imbalance between supply and demand, and smaller housing start-up activity,” Charles Brant adds.

“A sharp decline in overpricing levels could lead to significant price corrections in markets that have been the most exposed, and by definition exaggerated. It will likely be a relatively temporary episode, but it will be more or less severe from one region of Quebec to one region of Quebec. Other. This scenario assumes that there is no economic recession. If this is the case, which we do not expect, the price correction will be severe.”

Impact on buyers and sellers

As a buyer, you can be more patient, knowing that wild price increases are not expected. You may buy cheaper, but your mortgage payments will be higher.

If there is a drop in prices, and you are looking to sell and then buy, you will sell cheaper, but you will buy cheaper. So the net effect for you will be slight. On the other hand, if you are not planning to buy later, I advise you to put your building up for sale quickly.

Impact for owners who aren’t looking to sell

For owners who bought before the pandemic, any price drop will offset a portion of the increases that have occurred in the past few years. It’s not dramatic.

First-time buyers who have recently made an acquisition are most at risk, especially if they bought at a plus price. The stress test forced these buyers to plan for a financial cushion in the event of a rate hike. As for the risk of losing a job, even if the economy slows down, we are in a state of labor shortages. I do not expect a noticeable increase in the unemployment rate.

It is not impossible for prices to start rising again in 2024. In these times of high inflation and interest rates, I would advise owners who do not want to sell to reassess their budget and stop reading disturbing articles.

I invite you to consult my previous articles.


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