Rising House Prices and Rising Interest Rate: April Updates
According to the Canadian Real Estate Association the price of the average Canadian home has hit $816,720, its highest level on record, which is an increase of 20% compared to last year's level. However in Greater Victoria, the average cost for a single-family home is now over $1 million in all but three municipalities.
Across the region as a whole, the benchmark price stood at $1.141 million in March 2022, up 30.4% from March 2021.
But what is driving these rising prices?
The pandemic of course has had an impact. While in the first couple of months in 2020 sales volumes and price growth slowed to a crawl as buyers reacted to the uncertainty of the situation, it didn’t take long for there to be an insatiable demand for housing.
BC started 2022 with the lowest level of active listings on record, but if demand declines and more inventory comes onto the market in the spring, as is typically seen, prices may level out a little bit. However if the shortage of properties continues, we can expect to see the prices continue to rise.
Bank of Canada Increases Key Interest Rate to 0.5%
The Bank of Canada raised its benchmark interest rate to 0.5 per cent, a move which is expected to be the first of a series of small rate hikes this year, done in an attempt to tame inflation that has risen to its highest point in decades.
It's the first time since 2018 that the rate has been raised. Before the pandemic it was 1.75%, when it was slashed down to 0.25% to help the economy.
Lenders are starting to move in reaction to this increase, and the cost of those hikes could add up fast. For example, currently a qualified buyer looking to buy a $500,000 condo with a $400,000 mortgage could easily get a 25-year variable loan at about one per cent. That would cost them $1,507 a month.
If the central bank raises its rate five times and that buyer's lender matches the hikes, the monthly payment would jump to $1,842 a month, an increase of more than $300 every month.
Whether you’re buying or selling in this complex landscape, we can help you navigate the Victoria real estate market in 2022. Get in touch to start your property journey.