Canada’s average real estate prices back to 2015 values
Toronto housing values have had a rollercoaster couple of years, and despite the heating and cooling the market has seen each month, we’re back to average prices seen four years ago, in December 2015.
Huffington Post is calling this a sign “that the country’s long-run housing boom is history”.
On Friday, the Canadian Real Estate Association (CREA) reported that the average home sold on the Multiple Listing Service fell to $455,000 in January, across all housing types. Reviewing the last 12 months, this represents a 5.5% drop in home prices.
Your home still has value
The price drop is a clear sign that the real estate market is cooling; fewer buyers are securing mortgages and hitting the market. This doesn’t always mean, however, that your home has lost any value.
Looking at Toronto and Vancouver markets, where sales have slowed down rather dramatically, there are fewer expensive, multi-million-dollar homes being sold, which traditionally drive up average prices. Because the really expensive homes are not necessarily being sold as often, or inflating the average sales prices, the average price of a home on CREA's database can fall, even if the price of your home remains the same.
In 2015, the Greater Toronto and Greater Vancouver areas accounted for more home sales than they do now. By the end of 2018, their share of housing sales dropped from 29% across the country, to 22%.
January 2018 was a weak month for sales, as it was the exact same time when the mortgage stress test was introduced to limit over-borrowing and avoid a housing crash.
“Notwithstanding the intended consequences, tighter mortgage regulations that took effect in 2018 combined with previous tightening will weigh on economic growth this year,” said CREA economist Gregory Klump.
The Royal Bank of Canada is calling the seasonally adjusted numbers for December 2018 “a step in the right direction” as sales were actually up 3.6%, according to Huffington Post. Economists from the bank aren’t expecting much of an upswing over the next year, though.
“We think Canadian home sales will remain subdued in 2019, rising less than 2 per cent from 2018’s five-year low. Prices are expected to edge only slightly higher,” said an RBC report.