As per the recent study, it’s predicted that prices of housing or real estate may drop quickly in the initial months of 2023. However, the costs will slash but not enough to make housing affordable. As a result, the Bank of Canada is hiking the interest rates to stand against inflated prices, but it will only help a little to buyers or investors.
To keep the pandemic in view, the Bank of Canada initially maintained its interest rate low, but with a sudden increase in April, the interest rate touched new highs. Which has incredibly impacted the people who are seeking Homes for sale in Edmonton.
Impact of Real Estate Market Trends on Canadians
The real estate market is all about boom or bust! If we have seen a sudden boom in April, chances are high you might get to see the bust in the next few months. This is why Canadians are hesitant to take up real estate investing in Canada in early 2023.
On the other hand, a few Canadians consider real estate a long-term investment, which is a reliable way to get your money into the right thing. If someone is interested in investing in the market, the Canadian government should have collaborative efforts to address challenges and make ownership feasible. If you want more information on Canadian real estate investment in 2023, keep reading further!
POV: Bank of Canada
According to the Bank of Canada, the overnight shift of “3.25%” in rate of interest has helped the Canadian economy to evolve in its projected target. But as inflation is relatively high, most central banks are trying their best to combat the sudden high pricing. “Even if you see the records, annual Canadian CPI increased by 7.0% in August 2022, which is lesser than June 2022, i.e., 8.1% respectively,” says BoC. With this huge dip, it is expected that we will witness a significant increase in inflation in 2023.
In the next few months, you might see a continuous hike in rate of interest to hit the inflation target of 2%. With the current scenario, inflation is between 5–5.5%. However, the actual number in the market could be much bigger.
Most Prominent Market Trends You Can Expect For 2023
Canadian real estate investment saw a fair share of boom & bust in 2022. But it’s hard to anticipate what will come next in 2023. Keep reading further to understand the raging trends in the Canadian real estate market.
Increase in the Rate Of Interest
Last year during the 2022 market prediction, a significant rise in interest rates was expected. Many even predicted 2012 trends would make a comeback. In 2022, the Bank of Canada increased the interest rate by three times to project a robust Canadian economy. As a result, homeowners who were due for renewal between late 2022 and early 2023 decided to break their mortgages at lower rates to combat hikes.
But those homeowners who are due for renewal in 2023 can now expect 3 or 5 years fixed mortgages to be refinanced for 3% higher interest rates.
Landlords May Sell their Income Properties Near the Time of the Renewal Period
It’s predicted that landlords may have to bear the hit even harder if we see a rate hike. The most prominent trend is landlords selling their income properties at the time of renewal. The reason is simple yet compilated to get – “As per Canadian Real Estate Magazine – interest rates on investment properties are 0.6% higher than a standard mortgage. Which may increase to 7% during the renewal period.
Through other perspectives, the interest rates we are talking about may even outweigh the rental increase in various ways. Which may force the landlords to either pay an excess amount to hold back their investment property or sell it and put the property on the market.
During COVID-19 pandemic, we saw a rent freeze in 2022. But between 2022-2023, landlords of Ontario were given a chance to increase rents capped with a maximum of 1.2% interest. In 2023 we might get to see a significant increase in maximum limit with 2.5% rental caps. As a result, the average rent for all properties in Canada might get a 12.4% hike.
The key to playing safe with the Canadian real estate market is “staying up to date with upcoming trends” and our article talks about the same! If you ever feel you require more clarity over upcoming trends and ongoing interest rates, refer to our article above for In-depth knowledge. It will help you save a bunch of money and guide you to learn the market in the right ways.