Canada Housing First Price Drop in Two Years
Canadian home prices fell for the first time in two years as a rapid rise in interest rates looks set to threaten one of the world’s hottest housing markets. Benchmark home prices declined 0.6% in April from the month before, the first drop since April 2020, according to data released Monday from the Canadian Real Estate Association. The number of sales, meanwhile, plunged 12.6%. The shift is coming as the Bank of Canada embarks on an aggressive campaign of rate increases to fight inflation running at a three-decade high. Markets are betting that the policy interest rate, which began the year at 0.25%, will have to rise to 3% over the next year. The sharp jump in Canadian home prices since the pandemic -- they’re up 24% over the past 12 months -- was partly driven by emergency-low rates that helped the economy through the Covid-19 crisis. But now rate increases have left the nation’s housing market looking increasingly vulnerable. An inflationary surge is being seen around the world as supply chain problems combine with higher commodity prices caused by Russia’s invasion in Ukraine. Assets from stocks to bonds to cryptocurrencies have plunged in recent weeks as policymakers everywhere scramble to drain stimulus from the economy and get consumer prices under control. A separate release Monday showed Canadian consumer confidence posting its sharpest weekly drop since April 2020. In the housing market, last month’s price declines were heaviest in the smaller communities around Toronto that saw some of the steepest gains through the pandemic as remote work allowed buyers to look further afield. The suburbs of Oakville and Milton saw benchmark prices decline 5.6% in April from the month before, while prices in the city of London, Ontario, about a two hour drive from Toronto, declined 4%, the data show. The slowdown in sales activity, meanwhile, was broad-based, with 80% of local markets nationwide posting a monthly decline in transactions, the data show. The country has just 2.2 months of inventory available right now, compared to a longer term average of five months, the data show. But this metric has been moving up, and the ratio of sales to new listings -- another measure of market tightness -- fell to 66.5% in April. In its release, the real estate board said that ratio was approaching a level traditionally signaling the market is shifting to buyers from sellers.
Tags : Canada Housing the Canadian Real Estate Association Toronto Ukraine the city of London Ontario