A recent analysis reveals that home sellers in Canada are struggling to find buyers due to the rising costs of mortgages. This has led to a significant shift in the housing market, which is now considered a buyers’ market. Benjamin Tal, deputy chief economist at CIBC World Markets, described it as “a very weak market” and emphasized that Canada’s housing market is experiencing its biggest test since the 1991 recession.
One key factor contributing to the current situation is the increase in listings. Previously, a shortage of listings had kept housing prices high. However, with high interest rates and other expenses impacting homeowners, more properties are being listed for sale, adding to the available supply. Tal views this as a “very healthy correction” following a substantial price increase of 45 percent during the COVID-19 pandemic.
One of the areas most affected by the slowdown is the condo market. Tal explained that investors are rapidly withdrawing from this sector, while construction continues based on previous demand levels. This disparity between supply and diminished demand has resulted in a significant slowdown in the condo market.
As the market experiences a slowdown, there is concern that it may discourage new construction projects. This could exacerbate Canada’s existing housing supply shortage, leading to a future increase in prices once demand picks up again. Tal noted that in two years, when interest rates are expected to be lower and demand increases, the supply of new housing units may not meet the demand.
These challenges in the housing market highlight the need for homeowners, buyers, and policymakers to carefully navigate the changing landscape. While the current environment may present challenges for sellers, it could open up opportunities for buyers in the coming years.