The Winnipeg real estate bubble, such as it was, has officially burst.
The number of sales in August was down 18 per cent compared to August 2021 and the average price of detached single family homes sold in August was 2.5 per cent less than the average price in July.
With the Bank of Canada raising interest rates by 75 basis points this week it is expected to bring down the temperature even further on the cooling market.
MIKAELA MACKENZIE / WINNIPEG FREE PRESS FILES
The number of sales in August was down 18 per cent compared to August 2021.
No one expected the record-breaking sales numbers and sky-high prices in 2020 and through most of 2021 to continue and now it will be a question of how well the market is able to adjust.
“The market was bound to come off the highs of 2021,” said Peter Squire the vice-president external relations and market intelligence for the Winnipeg Regional Real Estate Board.
“What has hastened that has been the rapid rise in interest rates which has come fast and furious.”
The higher rates and meaningfully higher monthly mortgage payments, as well as higher qualifying costs, along with the general inflationary pressure of higher gas and grocery prices has impacted the current real estate market across the country, even in more affordable markets like Winnipeg’s.
Whereas last year and in the second half of 2020 more homes were selling above list price than not, that trend has now reversed with only 29 per cent selling above list price in August and 63 per cent of single family homes sold for less than their list price.
Akash Bedi, a broker with Re/Max Executives Realty and president of the WRREB said the current market has caused the market to re-set.
“The past 18 months were unicorn months. It was unheard of. No one really understood what was happening,” Bedi said. “Now with higher rates and the threat of inflation we need to get it under control.”
With twice as many listings now as there was at the beginning of the year, Bedi said he has seen examples of people taking properties off the market because of lack of offers or an inability to get the price they want.
As well, he said some people with pre-approved mortgages in place are now in a bit of a panic to close on a purchase.
“If they can’t close on a purchase they know when they go back to talk about rates their buying power will have gone down,” he said. “Some buyers are stressed. We do feel that happening.”
Bedi said it may take until mid-October to fully feel the effects of the rate increase, just in time, potentially for another rate increase as the Bank of Canada made it clear that rates will likely continue to rise.
But regardless of the financial markets, there may also be a natural decline in demand as the unusual pressures of working from home during the pandemic likely accelerated buying decisions for some.
“During the pandemic while there was historically low interest rates there was an impetus to find a home that people felt would be more suitable given the circumstances everyone found themselves in,” Squire said.
“It’s not surprising to me that some people who may have decided they were going to make a purchase in 2022 or 2023 already did so in 2020 or 2021.”
As much as the 2022 real estate market is sagging, Squire said it is still shaping up to be the third best year in history.
Martin Cash has been writing a column and business news at the Free Press since 1989. Over those years he’s written through a number of business cycles and the rise and fall (and rise) in fortunes of many local businesses.
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