The fast-changing scene of the housing market is evident right now in Canada.
After a long period of low-interest rates, we have entered an extended term of interest rate hikes. The hawkish stance of the Bank of Canada is the same as many countries globally.
Regina real estate market
Let us zero in on one market trending right now – Regina, Saskatchewan. Over the past two years, the price of a typical property in Regina rose 14 per cent. In May 2020, a Regina home typically sold for $287,800; as of May 2022, it cost around $328,200, and in July rose to a record high of $335,000 (see Canada Housing Report Map below).
Canada Housing Report Map
What does this all mean?
The housing market is still strong in Regina and overall, in Saskatchewan. Home prices are up 5 per cent year-over-year in a tumultuous period for the rest of the real estate markets in Canada.
Inventory levels are lower and still falling
Inventory levels fell even further by June 2022. According to Saskatchewan Realtors Association- SRA, the new listings are dropping in the Regina market. Home prices have fallen slightly in a higher interest rate environment, with high inflation numbers and sales activity slowing down in the past few months. The climbing interest rate pushes first-time homebuyers further away from the real estate market. The disparity in the number of buyers to sellers is evident in the chart below. Every seller has more than three buyers in the current market.
Saskatchewan Number of Buyers to Sellers
Source: Saskatchewan Realtors Association
The Canadian Housing market has cooled off by an estimated 15 per cent since interest rate hikes came in March 2022. In many provinces, the prices are still higher than the pre-pandemic levels of 2019. The Canadian Real Estate Association expects a cooling off of at least 23 per cent by the end of 2023.
Many leading Canadian economists think that the housing market has “corrected too soon, too fast” than even the Bank of Canada had anticipated. The provinces that saw the highest price gains during the pandemic will bear the brunt of the downward price adjustments in the coming months.
Saskatchewan and Regina real estate market
The energy-producing provinces like Saskatchewan, Alberta, and Newfoundland will be in a better position to weather the interest rate storm. Higher commodity prices are assisting like tailwinds, resulting in job creation and more workers entering the province. And all this leads to sustained demand and prices going upward in the real estate market in Regina and the region overall. If we examine the Regina real estate market, it is still 5 per cent higher than the benchmark price of June 2022.
Regina real estate market right now
Regina is a challenging and competitive housing market with rising interest rates putting upward pressure on affordability. Housing demand is still strong, but supply levels are slightly lower than expectations.
Samantha Krahn speaks for the Saskatchewan Realtors Association (SRA) and said in an interview last month, “We’ve seen a little bit of slowdown with the interest rate changes. The other kind of push and pull that’s happening is we have a really low supply of housing across the continuum in our province. It’s fairly pronounced in Saskatoon and Regina but even in other places like Prince Albert and Swift Current, a lot of those places really just don’t have the supply.”
Krahn also stated that many realtors are hearing that clients are either holding back because they can’t find what they’re looking for or discovering they can’t qualify for a mortgage.
Where does the market go from here?
The rate of decline in sales has cooled off since the spring market. Despite the double-digit decline in home value in Canada, the prices are still higher than the pre-pandemic levels for the most part. So, the alarm bell is still not ringing. Market activity indicates that we are headed towards more balanced conditions.
CEO of the Saskatchewan Realtors Association (SRA) Chris Guérette said in the monthly report that despite some shifts in supply, the market remains exceptionally tight with less than four months of supply – something that has not been seen since 2008.
Chris Guérette continued, “As expected, gains in lending rates are having some cooling impacts on the housing market, causing consumers to seek out more affordable options. The challenge will be product availability in the lower price ranges of the market. Supply levels are improving compared to earlier in the year. However, the year-over-year decline in inventory has been driven by homes priced below $400,000,”
Desjardins and other bank economists believe that the Bank of Canada’s policy rate will “top out” at 3.25 per cent (current is at 2.5 per cent) with three more decisions left until December 2022. The central bank expects to start cutting rates in 2023 as the housing downturn slows the economy.
BANK OF CANADA INTEREST RATE – MAY 2021 TO JULY 2022
What are the Saskatchewan Advantages going into 2023?
The advantages that Saskatchewan as a province has towards an improved housing market are:
Nimble public policy developed and targeted to help increase housing supply and build smartly over the next 5 years
Long-term trends of a younger demographic profile with more viable jobs available in the oil and gas industry, potash mine development, manufacturing
The province has plans to attract 1.4 million immigrants by 2030 and has higher homes per capita than the national average. The supply levels need to be bumped up by 39,000 (recent numbers) to meet the increased demand
And the province still maintains ‘affordability’ when compared to the rest of Canada.
Saskatchewan has a strong economy which has recouped well after the pandemic and has succeeded in attracting billions of dollars worth of investment in multiple sectors
In Conclusion – the fuller picture
The Canadian housing market’s current downturn is creating many hurdles for first-time home buyers. However, both sales and prices are likely to fall a bit more over the next year or so.
The provinces with the highest gain in the last two years (Ontario and British Columbia), have seen some of the highest percentage drops in home prices and leveling off the real estate market.
Saskatchewan, on the other hand, is still seeing gains in home prices even as inventory is tight. The market is still balancing out. Prices will still be high compared to last year.
The positive side is that overall, the higher rates will bring the real estate market more in line and some sanity to the sky-high home prices.