While the real estate market continues to cool in Canada, home prices in New Brunswick are still holding up.
last March, the Bank of Canada raised its rate from the director five times, taking the interest rate – set at 0.25% since the start of the pandemic – to 3.25%.
This measure, intended to slow down inflation in the country, has an impact on the sale of houses in Canada.
According to the Canadian Real Estate Association, in September, sales fell 32.2% compared to the same month last year.
In southeastern New Brunswick, we are seeing a similar slowdown. In the Moncton area, September home sales are down 34.5% from September 2021.
Mike Power, president of Realtors of Greater Moncton, said he’s seen the downturn in the area. The balance of power between buyers and sellers has balanced out.
Last March, homes in the area sold for an average of 7% above asking price. In September, it was rather 3% below the price.
“Buyers were offering way more than what was asked for the house without including any purchase conditions like financing or an inspection,” he says. All of these things that run on common sense when you’re about to make one of the biggest purchases of your life. Now, because the market clears, bids are made again with conditions. Sellers no longer have the big end of the stick.
In a sign that rising interest rates have had some impact on the real estate frenzy in Moncton, Claude Williams, a real estate agent with Keller Williams Capital Realty, points out that there is now a lot more inventory.
“In April, there were about 400 homes on the market. Friday morning, there were 1,111,” he analyzes.
Prices have also fallen somewhat. For example, the price of 73 houses for sale in the Moncton area has been revised downwards for the past seven days.
“Prices have come down a bit, month on month, except for September, but compared to previous years, they will remain high,” Mr. Power points out, however.
A less pronounced trend
The average price of New Brunswick homes fell from $290,700 to $283,600 between July and September, a decrease of 2.44%. During the same period, the average home price across the country fell 3%.
Since the Bank of Canada began raising the interest rate in March, the correction has been stronger elsewhere in the country, notes economist Richard Saillant.
Between the months of February and September, the average price of a house in Canada fell from $840,000 to $766,000, a decrease of 8.8%. During the same period, home prices in New Brunswick rose 3.8%.
“There is a gap of 12 percentage points between us and the national average, it’s not negligible,” said Mr. Saillant.
This difference is mainly due to newcomers choosing to settle in the province.
“Stats Canada data just came out and over the last four quarters, so for the past 12 months, the population of New Brunswick has linked over 20,000 people, that’s huge, that’s about 2, 5%. Of this number, 10,000 people arrived from other provinces, including almost all of Ontario,” analyzes the economist.
Even though house prices have fallen in Ontario due to rising interest rates, housing affordability remains an issue in Canada’s most populous province.
Despite the fact that the price of real estate rose by 60% in New Brunswick between March 2020 and September 2022 – the average price went from $176,500 to $283,600, the fact remains that the market here is more attractive to out-of-town buyers.
In Ontario, the average price of a house today is $927,000. It is 1.5 million in the Toronto area.
“The gap is still very attractive for them, knowing that houses in New Brunswick sell on average for $280,000,” said Mr. Saillant.
The pandemic has inflated the bubble
Today, the real estate market in Canada is feeling the effects of interest rates kept at historically low levels in order to combat the pandemic.
“It inflated the real estate bubble in an incredible way and here we are gradually deflating it, adds Richard Saillant. Most people agree that it’s not going to completely deflate, that there’s a floor. Whether it will be 10% or 20%, we don’t know.
If the trend is confirmed, the correction in New Brunswick will remain weaker than elsewhere in the country. And we must immediately forget the idea that the price of houses will return to what they were before the COVID-19 came to disrupt our lives.
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