Interest Rates in Canada have been going up

Find out how this is influencing the real estate market in Canmore!

On September 7th, 2022, the Bank of Canada raised interest rates by 75-basis points. The benchmark rate increased from 2.5% to 3.25%, a 14-year high. This was the fourth consecutive outsize rate increase and hit a level not seen since April 2008.

Given the outlook for inflation, the Central Bank is anticipating that the policy rate will still need to increase further.

The Bank’s next rate announcement is on Oct. 26th, 2022. It will also publish its quarterly monetary policy report, which lays out the central bank’s latest inflation and economic growth forecasts.

Raging inflation, Covid still around the corner, a War in Europe …. in a globalized world, these international crises influence real estate even in such small and remote places like Canmore. Predictions on future market developments are dependent on multiple factors and become more and more challenging.

So which changes have we seen in Real Estate in Canmore since 2021?

Let’s take a look at the sales numbers of the first eight months of 2021 as compared to 2022.

The number of Sales has decreased by 33% overall from 627 in Jan - Aug 2021 to 419 in Jan - Aug 2022. We can see decreases in all categories, but especially apartments and townhouses. Sales of vacation properties, properties that can be rented out short-term via Air B&B or similar, have almost remained the same when comparing the two years.

Average prices in 2022 Jan – Aug were 21% higher compared to average prices in 2021.

Highest increases were detached and half-duplexes with about 24%. The lowest increase was for apartments with only 4% increase compared to 2021. The overall average price for a property in Canmore is presently $1 million.

Where are we presently heading? Let’s take a look at the most recent 4 months (May - August) of 2022 and compare them with the first 4 months (Jan - April) of 2022:

Numbers of Sales in Canmore have come down by 20% from a total of 233 during the first 4 months of the year to a total of 186 during the second 4 months.

The biggest change was in vacation properties which went from 78 sales to 39 sales. That’s a 50% decline. Even if we take into consideration that we sold 16 new developments during the first third of the year and only two new developments during the second third, we are still looking at a 40% decline.Tourist homes ranged at minus 32%.

Both property types are often bought by investors who rent them out on Air B&B or similar and a change in interest would change the profitability calculation. It seems plausible that a higher interest would lead to a certain reservation.

Apartments went down by 28% and we can assume that it is first time home buyers that were cut-off the market by the increase in interest. A number of people might simply not have qualified any more for a mortgage or simply got scared.

Half duplexes and detached stayed about the same while townhouses gained.

What happened to prices over the last 8 months?

Let’s take a look at average prices of the first 4 months and compare them with averages during the last 4 months:

Vacation properties and apartments which took a dive in sales numbers also saw reduced prices since the start of 2022. All other categories saw further price increases.

Fortunately, the number of listings for Canmore has come up again from a rock-bottom low of 42 listings in the beginning of the year. But while I had expected them to go further up due to market pressure, they have started to come down again. We have definitely not gone into a buyer’s market and it remains to be seen where the market is going.

Summing up:
Sales in Canmore from Jan.–Aug. 21 compared to Jan-Aug. 22 are down 33%. Sales were lost over all categories except vacation properties which almost stayed the same (in total but strong downwards trend).

This year, especially vacation properties, tourist homes and apartments have been going down. These property types started very strong but have been going down a lot and if trend continues will loose a lot. (to be expected; explanation above)

Duplex, detached and townhouses lost sales compared to 2021, but remain on a rather steady level over the months of 2022.

Prices in 2022 compared to 2021 are up by 21%. Prices between Jan and Aug 2022 have been increasing except for vacation properties and apartments. (explanation above).

After a record-low in listed properties at the end of last year and beginning of this year, the number of listings has steadily increased and reached a level in June that we had not seen last year. However, listings started to decline again in August. It remains to be seen if this is temporarily and perhaps vacation related or if this is the start of a new trend.

THOMAS KRAUSE – CanmoreThomas | REALTOR Remax Alpine Realty Canmore

September 12th, 2022