Homes sold have gone down month after month this year, but sale prices are rising – what gives? When it comes to real estate, especially luxury homes for sale, it’s easy to wonder if we’re moving towards a real estate collapse. According to a recent Bank of Canada poll of people aged 25 to 45 fewer people are thinking about buying a home than they did 2 years ago; more Canadians don’t see buying a home as a big investment and are worried about a collapse – but is it warranted? Here we’re going to go over the numbers and see what they mean, so let’s get started.
Consumer Confidence Dropping
Consumer confidence has begun to drop, with only 40% of Canadian buyers looking at a home as an investment that they can count on later in life. Many buyers today believe that prices are overinflated, putting off any purchasing decisions until home prices come down to a more reasonable level. Unless the government, the Bank of Canada or both can find a way to increase consumer confidence the housing market may peter out before it was expected – not the greatest news by far.
Luxury Real Estate Still Riding High
Many foreign investors are coming to the major markets, Toronto and Calgary in particular, and buying up luxury real estate for sale. While many homes for sale in general are beginning to have trouble moving, luxury homes for sale have been fetching higher and higher amounts for generally the same location, space and amenities. While this is great news for the luxury sector, it’s not so great news for the rest of the market. Today home sales are down by about 3% when compared with last year, but they are fetching consistently higher prices across the board.
Prices Expected to Level Out
Prices are expected to begin leveling out in the near future, which is great for people who want to buy. Owners that have been waiting for the “best” time to sell their homes may want to act soon, but many luxury realtors say that prices aren’t expected to level out until early next year when the US begins raising interest rates. Depending on when this happens we’ll seed interest rates in Canada also begin to change, since the two markets tend to operate in tandem (up to a point anyway).
What Does This Mean Long Term?
In the long term the days of double digit growths annually in appraisals are over; it sounds bad, but even for luxury homes for sale it’s not a bad thing. If interest rates don’t eventually take a hike people will have no reason to save, and then we’ll end up in another kind of financial crisis. The zero interest rate policy that many countries have adopted to avoid austerity has helped, but it has to end eventually, especially with so many Baby Boomers depending on their savings to earn them money in the coming years.
The Goodale Miller Team is the #1 team in Canada for Century 21 8 years running. Specializing in Oakville luxury real estate including luxury Oakville homes for sale, infill building lots, condominiums and more. Visit their website today at http://www.goodalemillerteam.com/