Between March 2022 and July 2023, the Bank of Canada (BOC) increased interest rates ten times, elevating its benchmark rate from 0.25% to 5% in what has been one of the most aggressive monetary policy tightening campaigns. Over the past six rate decisions, it has maintained the policy rate steady at 5%, with its next update scheduled for Wednesday, June 5, 2024.
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In light of these changes, we examined major real estate markets across Canada, including the Greater Toronto Area (GTA), to observe how home prices have changed since February 2022, the month before the BOC’s first rate increase.
Where Are Real Estate Prices Dropping Across Canada?
Brock had the steepest decline, with average home prices falling from $1,168,477 to $800,000, a 31.8% drop. Oshawa and Clarington also saw significant decreases, with property values dropping by 26.5% and 25.7% respectively. Overall, 64% of cities in Ontario, including Brampton, Essa, Pickering, Burlington, Vaughan, and Ajax, experienced decreases exceeding 20%.
Meanwhile, Toronto and Mississauga experienced smaller price declines of 5% and 8% but still hovered around the million-dollar mark. Kitchener-Waterloo had the second-largest percentage decrease at 22.2%, followed by London-St Thomas at 22.6%.
On the other hand, lower home prices due to higher interest rates create potential opportunities for buyers.
“High mortgage rates have put downward pressure on home prices. In many major Canadian markets, home prices are either lower today or similar to what they were in 2022 before the rate increases began. This has led to opportunities for savvy buyers, that have had the luxury of time to negotiate on their side, as the market activity slowed,” said Carrie Lysenko, CEO of Zoocasa.
Affordability Attracts Buyers on Canada’s Coasts and Prairies, Boosting Home Prices
Across Canada, the four most affordable cities—Calgary, Saint John, Edmonton, and Regina—have seen price increases, likely due to Canadians seeking affordability.
Alberta, known for its accessible housing prices, experienced the highest interprovincial migration from 2022 to 2023 according to Stats Canada. Conversely, Ontario saw a notable shift, with 41,929 residents relocating to other parts of Canada within the same period. This trend highlights the dynamic nature of interprovincial migration, driven by Ontario having one of the highest cost of living rates in the country.
Saint John experienced the highest increase in property values among all regions, with a 27.5% increase since February 2022. Calgary also saw a significant boost, with property values climbing 15.43%. How high prices will climb in Canada’s most affordable markets is yet to be determined and heavily depends on when the Bank of Canada will start lowering rates. However, even with potential rate decreases, it is unlikely that the growth in home prices will slow down this year, given the strong influx of new residents and the sustained demand for housing and a better quality of life.
Analyzing Property Value Declines in the GTA
From February 2022 to April 2024, all property prices decreased across the 14 GTA studies analyzed in the study. London-St Thomas faced the largest percentage decrease in property values, dropping 23.92% since March 2023, which equates to a $186,300 decline. Midway through this period, from February 2022 to March 2023, Vaughan saw a 9.9% increase, adding $158,437 to property values. Among all regions analyzed, Toronto experienced the smallest decline at 5%.
Considering these figures, it’s important to note that despite higher interest rates, this period can reduce competition for homes. Buyers can negotiate better deals, avoid bidding wars, and secure properties at more reasonable prices.
“Despite the high mortgage rates, lower prices may lead to savings across the duration of a homeowner’s total mortgage depending on their lending terms. It’s important to remember that a buyer is usually locking into a rate for just 3-5 years, while the total amount of the mortgage borrowed remains constant over the 25-30 year amortization. It’s best to try and secure a home you love at a price you’re comfortable with and navigate interest rates as they evolve,” Lysenko explains.