More than 40% of Canadians put a pause on their home purchase

A new survey has revealed that 44% of Canadians are looking to pause their next property purchase. This is according to new data published by REMAX Canada. The primary reasons cited for the tentative outlook are rising interest rates, steep inflation, and general economic uncertainty.

The data compiled has led REMAX to predict a further 2.2% drop in home prices between now and year-end. This conclusion was reached by speaking with numerous estate agents and brokers. The overwhelming factor of the challenges currently facing the real estate market is the rising interest rates. Of the 30 brokers who were polled, 25 of them said that rising interest rates have negatively affected the housing demand in their local residential market this year.

Still, not all Canadians are deterred. 34% of those polled said they would not wait to buy a house in this high interest rate environment. The central bank has raised interest rates five times since March this year. The overnight lending rate is currently 3.25% - Which means that consumers are now facing a prime rate of 5.45%. Subsequently, most mortgage rates are around 7%.

Still, the president of REMAX Canada, Christopher Alexander, says this correction has been healthy and is unlikely to last too long. “While we are still facing significant housing supply shortages across the country, many markets are experiencing softer sales activity given recent interest rate hikes. This provides some reprieve from the unprecedented demand and unsustainable price increases we’ve seen across Canada through 2021 and in early 2022. However, the current lull in the market is only temporary. Until housing supply increases, these ‘boom’ and ‘bust’ cycles will likely be a recurring event.”

Although the projections indicate that the prices may still dip slightly lower for Q4 2022, this is unlikely to continue far into 2023. “Despite the fact that nearly half of Canadians are waiting to buy or sell a home, we’re confident that as economic conditions improve by mid-2023, activity will resume,” says Elton Ash, Executive Vice President, RE/MAX Canada.

The allure of real estate as a long-term investment is likely to remain a safe bet despite the short-term market conditions. “Timing the market for short-term investment is extremely difficult and rarely successful. But real estate as a long-term investment continues to yield solid returns. If someone needs to engage in the housing market, regardless of those cyclical peaks and valleys, being informed and working with an experienced real estate professional can help consumers clarify some of those unknowns and make the best decision possible”, concluded Mr. Ash.