2022 was a turbulent year for the real estate industry in Ontario. Between plummeting home prices, rising interest rates, and an uncertain future, the sector has been under significant stress. Here's where real estate in Ontario stands today and what these trends may tell us about the future.
Economic Correction
The most significant factor impacting Ontario's real estate industry is the continued effect of a post-covid economic recovery. This recovery has occurred for over a year, and the process has not been linear. For the third month in a row, home prices in the province have risen, this month by 2%. Still, prices are down 16% from this time last year. Home prices are expected to stabilize soon and return to pre-pandemic levels. Along with this, the market is expected to heat up this summer, with sales already increasing 11.3% in April.
Bank of Canada Interest Rate Hikes
The Bank of Canada paused its interest rate hiking campaign in April just before the housing markets started to see upturns. The central bank used these high interest rates to try to slow down the economy during the pandemic recovery period to curb inflation. If the housing market continues to recover quickly, interest rate cuts may be delayed.
The interest rate increases left the economy at a 4.5% inflation rate, the highest in 15 years. The Bank of Canada says it aims to get inflation back to 2% as quickly as possible, and a hot housing market in the summer may delay this goal.
Low Housing Inventory
One persisting problem in the Ontarian real estate industry is the low housing supply. The government has continued to strategize for its goal to build 1.5 million homes by 2031; here are some of its recommendations:
Maintain various types of housing, including apartment buildings or multi-generational housing
Build near transit
Meet minimum density targets, specifically in developments near transit
Municipalities require a minimum of a 25-year development plan
Separating housing from industry that may be loud or produce unwanted by-products
The plan also includes a $6.5 million investment to speed up the approval process of the Landlord and Tenant Board to ensure the timeline of their building goal can be reached. Ontario is also looking at modular construction and other innovative options to reduce the cost of building attainable housing and speed up housing creation.
Speaking with a professional will help determine if a property will be profitable. Visit www.regalwayhomes.com/book-online to book a consultation with experts today!