Real estate market slowdown will continue, economist says

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The real estate market slowdown will continue, an economist believes

The number of property sales in Quebec fell by 18% in the third quarter of 2022, compared to last year.

The rise in interest rates had the effect of a cold shower on the overheating of residential real estate in Quebec, according to data from the Professional Association of Real Estate Brokers of Quebec. Quebec (APCIQ). The trend is likely to continue for the next year, adds a Desjardins Group economist.

Whether it is the decline in the number of properties sold, the increase in supply (number of listings), longer times to find a buyer or the decrease in prices compared to the peak of x27;April, the main indicators point to a slowdown in the residential real estate market, which had experienced overheating in 2021 and at the start of 2022.

The number of sales in Quebec fell 18% in the third quarter, compared to the same period last year, to 18,146 transactions, according to APCIQ data. The figure is below the pre-pandemic average for a third quarter.

This is a major change of course since April, comments Hélène Bégin, Senior Economist at Desjardins Group.

“Sales nevertheless fell quite quickly, due in particular to the rise in mortgage rates, which accelerated. It confirms what we anticipated a few months ago. The market is cooling down quite drastically. »

— Hélène Bégin, Senior Economist at Desjardins Group

The trend is likely to continue for the next few months while the Bank of Canada has not finished raising its key rate, anticipates Ms. Bégin. The full effect of the rise in interest rates has yet to be felt, it is only the start of a period of correction for the residential real estate market, which had experienced , it must be said, significant excesses during the pandemic.

The economist predicts that prices will continue to fall until the end of 2023.

The reason is simple: there has far fewer buyers who are able to take out a loan to purchase a property. Those who are able to get a loan, often the amount is not necessarily enough to take action immediately.

There are fewer potential buyers, people are more cautious and that means the market will continue to correct, she adds.

Data of the APCIQ show that the situation is different from one region to another, underlines the economist.

Activity experienced the strongest slowdowns in regions where the phenomenon of overvaluation was greatest. Sales fell 23% in the greater Montreal area and 19% in the Gatineau area. In Quebec, the decrease is 9%, while activity is down 15% in the Sherbrooke region.

In comparison, activity remained stable in Trois-Rivières and Saguenay (0% and 1%, respectively).

Real estate prices are also down from their all-time high reached in the second quarter, from April to June. The median price of a single-family home fell by almost 10% for the period comprising the months of July, August and September, compared to the previous three months, from $448,694 to $400,000. The median price is still 10% higher than the same period last year.

The decrease in the number of transactions is more pronounced in the condominium and multiplex segments, which respectively recorded a decline of 25% and 34% compared to the same period last year. The decline is only 13% for single-family homes.

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