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Home Canada

Canada’s Most Expensive Real Estate Market Is Dropping An Average of $2,200 Per Day

MtR by MtR
July 5, 2022
in Canada
0


Canadian real estate prices got a big boost from central bank stimulus, sparking a speculative frenzy. That frenzy is coming to an end fast, with more than half of major markets off peak. A pullback is expected after rapid price increases for real estate markets. What’s unexpected is the pace of the pullback, possibly one of the fastest declines Canada has ever seen. The country’s worst performing markets are now falling an average of thousands per day. However, markets are so frothy, this has only put a dent in the gains made. 

About Today’s Data

After rate cuts began in March 2020, real estate markets went through a brief lull before surging. Record home sales and price gains were fueled by cheap debt for nearly two years. Now that rates are rising, some markets have given back some of the gains. Today we’re looking at the worst performing markets.

Canada’s Most Expensive Real Estate Market Is Down $2,200/Day Since Peak

Oakville, a posh Toronto suburb and Canada’s most expensive market, led the dollar drop. The price of a typical home peaked at $1,645,900 in February 2022, up 65.0% ($648,100) since March 2020. Just the increase made over the two years is the equivalent of 3 homes across Canada in 2005. And people say it’s a totally normal market, eh?

The only thing faster than Oakville real estate’s climb might be its fall. Prices dropped 5.0% ($75,800) in May, and are now down -12.4 -$204,100 from the peak reached in February 2022. About 31% of equity value gained since March 2020 has reversed. It’s kind of hard to imagine how fast that drop is  — it’s an average decline of more than $2,200 per day since reaching its peak.

Canadian Real Estate Price Are Falling

Major Canadian real estate markets where the composite benchmark price of a home in May 2022 is lower than the peak price.

Source: CREA; Better Dwelling.

One Real Estate Market Has Lost A Third of Gains Over 3-Months

Cambridge, a commuter town from Toronto, is now in the middle of the largest correction in the country. A typical home peaked at $993,800 in February 2022, up a whopping 83.8% ($453,100) since March 2020. Prices nearly doubled over a two year period, a frothy gain for any market in the world. 

Since peaking in February 2022, Cambridge has led the way lower for the country. Prices dropped 15.0% ($149,000) since peaking, making it officially a correction. Just 3 months reversed nearly a third (32.3%) of increases made over the 2 years prior. As we say in finance, risk happens fast.

Canadian Real Estate Prices Down From Peak

The dollar drop for major Canadian real estate markets that have fallen from the peak.

Source: CREA; Better Dwelling.

Kitchener-Waterloo Real Estate Is On Track To Reverse All Gains By Next Year

Kitchener-Waterloo, a commuter suburb of Toronto, saw the third biggest drop. Home prices peaked at $957,900 in February 2022, rising 74.1% ($408,800) since March 2020. It’s also in Southern Ontario, if you didn’t notice. Sensing a pattern here?

Since the February 2022 peak, Kitchener-Waterloo home prices contracted sharply. In May 2022, it was down 11.4% ($109,300) since hitting the February 2022 high. The market has rolled back 26.8% of gains made over roughly two years.. If this keeps up, the market should be back to where it started by the start of next year — do over. 

Southern Ontario Real Estate Is Leading Lower

We swear this isn’t a Southern Ontario article. Southern Ontario real estate led the boom and appears to be leading the bust for home prices. The next three worst performing markets are also in Southern Ontario: London-St. Thomas home prices fell 9.7% ($75,600) since peaking, Mississauga fell 6.5% ($88,300), and Hamilton-Burlington is down 7.6% ($81,600).

The next few cities after those happen to be in Southern Ontario as well.

Even Toronto Real Estate Is Averaging $1,200 In Losses Per Day

Skipping two more Southern Ontario cities leading for losses, we get Greater Toronto. The index for the country’s largest market shows home prices peaked at $1,303,900 in March 2022. This was an increase of 58.0% ($490,000) from March 2020. Toronto went from one of the most affordable big cities in North America to being declared one of the world’s biggest real estate bubbles in less than a decade. World. Class. 

Toronto home prices have since fallen 5.5% ($73,200) since peak, wiping out about 14.9% of gains made since March 2020. That’s a loss of about 1 in 7 dollars gained since the Great Rate Cuts of 2020. Or put another way, prices are falling an average of $1,200 per day. It’s the country’s 10th worst performing market. 

Falling interest rates provided fuel for speculators, sending prices soaring. Now that rates are rising, the speculative mindset has broken. It’s too early for higher interest rates to have throttled capital so much in these regions. However, seeing some losses has shown people that home prices can’t continue to rise at the rate they did, and market participants are now engaged in price discovery. 

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