The Greater Vancouver Area (GVA) and Greater Toronto Area (GTA), the heavy hitters in Canadian real estate markets, took a couple of shots to the gut in April..Home sales in both markets declined precipitously in April from March, as well as year-over-year. In the GVA, sales dropped 25.6% from March and 34.1% from April 2021, while the GTA saw a 27% decrease from March and a headlong fall of 41.2%, year over year..Market watchers expect soaring sales trends to decline even more this spring..“So far this spring, we’ve seen home sales ease down from the record-breaking pace of the last year,” said Daniel John, chair of the Real Estate Board of Greater Vancouver (REBGV)..“The return to a more traditional pace of home sales that we’ve experienced over the last two months provides hopeful home buyers more time to make decisions, secure financing and perform other due diligence such as home inspections.”.The Bank’s rate increase was designed to move buyers to the sidelines, said Kevin Crigger, president of the Toronto Region Real Estate Board (TRREB)..“Based on the trends observed in April, it certainly appears that the Bank of Canada is achieving its goal of slowing consumer spending as it fights high inflation,” said Crigger. “Negotiated mortgage rates rose sharply over the past four weeks, prompting some buyers to delay their purchases.”.“It will be interesting to see the balance the Bank of Canada strikes between combatting inflation versus stunting economic growth and related government revenues as we continue to recover from and pay for pandemic-related programs.”.The Bank’s next rate adjustment is June 1. Some mortgage and real estate specialists predict it will follow the aggressiveness of the Federal Reserve in the US and raise the rate .5%, taking it to 1.5%, the highest in years..Others think the bank could hold steady or raise the rate .25% due to the quick and large sales declines in the two cities..The deciding factor could be sales prices..The composite benchmark price in the GVA in April was $1,374,500, an 18.9% increase over April 2021 and a 1% increase from March..In the GTA, April’s benchmark price was $1,254,436, up 15%, year over year, but down from $1,300,082 in March..“Market conditions remained tight enough to support higher selling prices compared to last year,” said TRREB chief market analyst, Jason Mercer..“However, there is evidence of buyers responding to increased choice in the marketplace, with the average and benchmark prices dipping month-over-month. It is anticipated the annual pace of {price} growth will moderate in the coming months.”.Activity in both markets should be considered a slowdown, not a full stop, said Paul Betts, president of GAP Marketing, which provides services to the real estate industry, including marketing, sales training and leadership development..Betts uses a highway analogy.."When you are on the 401 or Coquihalla highway and traffic is moving at 125 km/h, instead of 110, it's normal to have to or want to keep pace, especially when there are no speed traps, radar or weather issues,” he says, alluding to high mortgage rates..“It is also normal that traffic will slow to 110, but then people think ‘I'm crawling’, but they’re not.”.“The fury, in my opinion, in all markets over the past eight to 12 months, was entirely driven by the market realizing interest rates were abnormally and historically low and more government initiated slowing measures were coming.”.“Fully one-quarter of market activity, in Toronto and Vancouver, was driven by investor sales in the past year, which is high, historically. One-third are typically repeat buyers moving equity. That leaves about one-quarter of the market to first time buyers.”.Vis-a-vis, more market is opened to first-time buyers, who will see higher prices, says Betts, who has a prediction for the next ‘hot markets.’.“There is a day of reckoning coming on prices, but many will confuse ‘average’ price to what is real,” he says. “The only way to truly track prices is product (by home type), not the overall sales volume divided by the number of sales.".“Calgary is already softening, but it's destined to be one of the hottest Canadian markets, with Edmonton, in the next 18 months.”.Policymakers must keep their eyes on the ball, said TRREB CEO, John DiMichele.“They should not assume that because home sales are off their record peak we can ignore the lack of inventory in the market,” said DiMichele. “Buyers who have moved to the sidelines will not remain there forever, and the population of our region will continue to grow on the back of immigration.”.“In the absence of new supply, there will be a significant amount of pent-up demand that will need to be satisfied in the not-too distant future. Increasing and diversifying our housing supply needs to be a key area of debate in our upcoming provincial and municipal elections.”
